7-16-2004
Martha gets five months
By Krysten Crawford, CNN/Money staff writer

Stewart speaks outside the courthouse after her sentencing, saying she'll be back.

NEW YORK (CNN/Money) - Martha Stewart was sentenced to five months in prison and two years' probation Friday for lying to investigators about her sale of ImClone Systems stock in late 2001.

Federal Judge Miriam Goldman Cedarbaum also ordered Stewart to five months of home confinement after her release and fined the lifestyle expert $30,000.

The sentence was the minimum the judge could impose under federal sentencing guidelines. And while relatively small given Stewart's wealth, the fine was the maximum allowed under federal rules.

Peter Bacanovic, Stewart's former broker at Merrill Lynch, also was sentenced to five months in prison and two years' probation and was fined $4,000.

Stewart will not be headed to prison anytime soon, however. The judge issued a stay delaying the sentence until a court rules on her expected appeal, a process that could take nine months or longer.

Stewart appeared outside the courthouse after she was sentenced and expressed regret, but also pledged, "I'll be back."

Stewart's attorneys said they won't file a formal appeal Friday.

They have 10 days to file their motion to overturn her conviction last March on obstructing justice, conspiracy and making false statements during an insider trading investigation into her sale of $228,000 worth of ImClone Systems (IMCL: Research, Estimates) stock in December 2001.

Bacanovic was convicted on four counts along with Stewart.

Robert Morvillo, Stewart's lead trial attorney, asked that if Stewart eventually does go to prison, she be sent to a federal facility in Danbury, Conn. Judge Cedarbaum said she would refer the matter to the Federal Bureau of Prisons.

The Stewart case is one of a number of criminal indictments that prosecutors have brought against corporate executives in recent years.

While comparatively small in terms of dollars at stake and the gravity of the crime, Stewart's obstruction of justice case has been a powerful public relations vehicle for government officials to send the broad message that corporate malfeasance won't be tolerated.

From the start, Stewart's supporters have argued that prosecutors unfairly singled Stewart out because of her power and high public profile.

Some legal experts countered that Stewart has only herself to blame for trying to cover up her ImClone stock sale.

"Her greatest wounds have been self-inflicted," said Marvin Pickholz, who represented Douglas Faneuil, the former assistant to Stewart's broker and the government's star witness at trial.

'Shameful day'
Throughout the 2 1/2-year ordeal, Stewart has been defiant and her lawyers have been criticized for pursuing red herrings in an effort to clear her name. Wearing a dark pant suit, she arrived at the courthouse early Friday accompanied by her daughter and son-in-law.

Martha Stewart comments on her sentencing, encourages supporters to continue buying her products, and promises to be back.

Before her sentencing, Stewart read Cedarbaum a statement saying, "I seek the opportunity to repair the damage wrought by the situation, to get on with what I have always thought was a good, worthwhile, and exemplary life.

"My hopes that my life will not be completely destroyed lie entirely in your competent and experienced and merciful hands. Thank you and peace be with you."

Soon after the 30-minute hearing ended, however, Stewart was back on the offensive. Appearing before television cameras outside the courthouse, Martha called it a "shameful day."

"What was a small personal matter became, over the last two years, an almost fatal circus of unprecedented proportion," she said.

"I have been choked and almost suffocated to death," she said, adding she's "not afraid whatsoever" of what's to come.

"I'll be back," she declared.

Stewart also appealed to people to show their support by subscribing to her magazine, buying her products and telling advertisers to return. (For Stewart's full statement, click here).

Just as former Enron Corp. chairman Kenneth Lay has used the media to protest his recent indictment, Stewart planned to take her message to the airwaves.

She was scheduled to tape an interview with Barbara Walters for airing Friday night on ABC's "20/20," and is slated to appear live Monday on CNN's Larry King Live.

Martha supporters outside the courthouse Friday.
At Martha Stewart Living Omnimedia headquarters in midtown Manhattan, employees -- who said they were told not to speak to reporters -- told CNN they had a "surreal feeling" when they heard the sentence.

Since Stewart's indictment two years ago, the health of her company has deteriorated. Some 200 employees have lost their jobs as advertisers have fled the flagship magazine and paid circulation has dropped.

But investors cheered Friday, and shares of Martha Stewart Living (MSO: up $2.55 to $11.19, Research, Estimates) jumped about 35 percent shortly after the hearing ended, though later backed off.

Jail time seemed certain
Legal experts were split before the sentencing on how hard Cedarbaum would come down, but most agreed that the sentence would call for some jail time.

"The judge probably felt that, given the loss of status and the impact on her business, that this punishment was fair and just," Stanley Twardy Jr., a former Connecticut U.S. attorney, told CNN/Money after the hearing.

Twardy and other legal experts said that Stewart's chances of winning on appeal appear slim.

"No one can criticize the judge for meting out this sentence," said Michael Proctor, a former federal public defender. "The judge did about as much for the defense that she could do."

Proctor estimated it could take nine months to two years before a higher court rules on Stewart's appeal.

He called Cedarbaum's decision to let her stay out of jail pending the appeal's outcome "a very big victory" for the defense because it avoided the prospect of Stewart serving her time before an appeals court had a chance to rule.

"Without the stay, her appeal would have been meaningless," said Proctor, now a partner with Caldwell, Leslie, Newcombe & Pettit in Los Angeles.

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