March 5, 2004: Martha Stewart Convicted in ImClone Trial


WHAT HAPPENED? (1)


Martha Stewart, a housekeeping maven, business woman, writer, TV personality, former model, became a convicted felon on March 5, 2004, after being involved in the ImClone stock trading case.


After being released from prison in 2005, though many believed her empire would crumble, Stewart made a comeback including TV shows, books and partnerships that allowed her to keep moving forward, putting the incident behind her.


Stewart has been involved in many successful business ventures, including but not limited to, publishing, broadcasting, merchandising and e-commerce. She is a best selling writer, the publisher of her own magazine, and has hosted 2 television programs... Many of these successes happening after her prison sentence.

THE CRIME, THE TRIAL, AND THE SENTENCE


In December 2001, after receiving "material, nonpublic information" from her broker, Peter Bacanovic at Merrill Lynch, Stewart sold all of her shares in ImClone systems and avoided a loss of over $45,000. The stock value fell 16% the day after she sold her shares. (1)


Stewart faced heavy media scrutiny right off the bat, with Newsweek using the story on the cover of their magazine with the headline "Martha's Mess". She was grilled on The Early Show as well. In late 2002, Stewart resigned from her position on the board of directors for the New York Stock Exchange, a position she had only held for 4 months. (1)


On June 4, 2003, Stewart was indicted on 9 counts, including securities fraud and obstruction of justice. She stepped down as CEO and Chairwoman of her company, Martha Stewart Living Omnimedia, but she stayed on as their chief creative officer. (1)


The trial began in January of 2004, and it became clear that Bacanovic had ordered his assistant to tell Stewart that the CEO of ImClone was selling his shares in advance of an adverse FDA ruling, a ruling that was expected to be negative for ImClone. (1)


The trial was 6 weeks long and highly publicized. Stewart was found guilty on March 5, 2004, on felony charges of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators. She was sentenced to a 5-month term in a federal correctional facility, a 2-year period of supervision, including 5 months of electronic monitoring and house arrest. She was also fined $30,000. (1)


Her statement upon her conviction was as follows: (2)


"I am obviously distressed by the jury's verdict but I continue to take comfort in knowing that I have done nothing wrong and that I have the enduring support of my family and friends.

I will appeal the verdict and continue to fight to clear my name. I believe in the fairness of the judicial system and remain confident that I will ultimately prevail."


Bacanovic and Waksal, the CEO of ImClone, were also convicted on federal charges and sentenced to prison time. (1)


Stewart did not want to serve time at the recommended prison in West Virginia, because it was very remote and would make it difficult for her 90-year-old mother to come visit. The judge allowed her to select 2 prisons and they would allow her to stay at one of those choices. But then, someone from the U.S. Department of Justice said that her first choice would be too easy for the media to access, and her second choice was too full because of re-locations from a recent hurricane, and thus she would have to serve her time at the Federal Prison Camp, Alderson in West Virginia.


She reported at 6:15 AM on October 8, 2004. In jail, she took a job and became something of a liaison between the prison administration and the inmates. She was released on March 4, 2005, and placed on house arrest for 5 months, with the ability to leave for 48 hours per week for work.


For the remainder of her 2-year supervision, she had to remain employed, could not engage with people who had criminal records, and had to get permission to leave New York.


In 2006, the SEC wrapped up and settled in the related civil case against Stewart. She had to disgorge $58,062, which was the loss she avoided plus interest, and also had to pay another penalty of 3 times the loss she avoided. She had a 5-year ban from being the director, CFO, CEO or any other role in a public company that would deal with finances.


But, despite many thinking (and reporting) that the "goddess of domestic perfection" would crack because of the incident, Stewart was just getting started.

MARTHA'S COMEBACK


Immediately after her release, it appeared that she had just picked up where she left off.


In the same year that she was released, she returned to daytime television on 2 different shows, The Martha Stewart Show and The Apprentice: Martha Stewart. She released 2 books, The Martha Rule, providing direction on starting and managing businesses, and Martha Stewart's Baking Handbook. (3)


In the following few years, she announced various lucrative partnerships, released more books, and was nominated for 6 Emmys. She guest starred on popular television shows, released lines of products and homewares and food with different major corporations, and had even more shows come out. (3)


But despite her comeback, even years later, she remembers how terrible her prison sentence was. (4)


"It was horrifying and no one - no one - should have to go through that kind of indignity, really, except for murderers, and there are a few other categories." She said that quotes like making lemonade out of lemons, or what doesn't kill you makes you stronger didn't apply to her, because it was just terrible. (4)


Growing up, all I knew about Martha Stewart was that she baked and she went to jail. As a kid, going to jail meant that you were a terrible person, and so for much of my life, I heard Martha Stewart's name, and read of her successes, and thought it was not deserved because she was a bad person.


Learning more about her, learning about what she actually went to jail for, and her hard-working attitude to move past it and continue her success was a completely new lens to look through. Even though Martha Stewart became a convicted felon 16 years ago today, she has spent those 16 years proving that she is more than that, and will continue to be.


REFERENCES:

1.https://en.wikipedia.org/wiki/Martha_Stewart#Stock_trading_case_and_conviction

2.https://money.cnn.com/2004/03/05/news/companies/stewart_response/index.htm

2. https://artfulliving.com/martha-stewart-comeback/

3. https://www.today.com/home/martha-stewart-opens-about-horrifying-prison-stay-nothing-good-about-t117171

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