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Mar. 10, 2004. 01:00 AM

Martha shares continue to dive in wake of verdict
Founder's future still up in the air

Home diva may face tough appeal

NEW YORK—Martha Stewart's felony conviction rattled through her rapidly eroding business empire as shares of her namesake company kept falling, Viacom Inc. cancelled her syndicated television show and she quit the board of cosmetic giant Revlon Inc.

But the big question that remains is the future of the domestic diva's bread-and-butter job as a leader within the company that bears her name.

Martha Stewart Living Omnimedia Inc.'s board met Monday to discuss Stewart's future, according to a source close to the company who spoke on condition of anonymity. Company officials would not comment and it was unclear whether the board took any action.

Company officials did not return calls seeking comment yesterday.

Shares of Martha Stewart Living Omnimedia fell 35 cents (U.S.), or 3.5 per cent, to $9.55 yesterday, adding to a drop of 8 per cent Monday and nearly 23 per cent Friday after the verdict.

Stewart stepped down from her roles as chairman and chief executive after being indicted in June but remains a board member and chief creative officer. With her conviction, the U.S. government will likely press to have Stewart removed from the board.

Stewart was convicted Friday, along with stockbroker Peter Bacanovic, of lying about why she sold 3,298 shares of ImClone Systems Inc. stock on Dec. 27, 2001, just before it plunged because of a negative report from government regulators.

Stewart was convicted of conspiracy, making false statements and obstruction of justice. Bacanovic was convicted of conspiracy, false statements, obstruction and perjury — but cleared of falsifying a document. Both have said they will appeal.

Legal experts said the best-case scenario, the dismissal of the guilty verdicts handed down Friday, will be difficult for defence lawyers to win and Stewart's trial poses a particularly high hurdle because of the accuracy of the judge's rulings.

Ivan Fisher, a Manhattan defence lawyer, said appeals court reversals are typically based on errors made by the trial judge. "I don't think she made any," he said of U.S. District Judge Miriam Goldman Cedarbaum, who oversaw Stewart's seven-week trial.

Although Stewart was convicted of lying to investigators about the circumstances of the stock sale, she was not charged with insider trading. Because of this, the judge barred the defence team from arguing that no illegal trading took place.

Andrew Schapiro, a defence lawyer who specializes in appellate work at Mayer, Brown, Rowe & Maw, said this could give Stewart grounds to appeal. "Her lawyers certainly have their work cut out for them but they have one strong issue and maybe more," Schapiro said.

"They can be expected to argue that Judge Cedarbaum violated Martha Stewart's right to put on a complete defence by prohibiting her from putting on testimony or evidence about insider-trading law."

But Joel Cohen, a lawyer at Greenberg Traurig, was doubtful. "I'm not aware of any fundamental errors by the judge," he said. About the insider trading issue, he said, "It isn't what you do, it's the cover-up."

Both Stewart and Bacanovic are expected to get 10 to 16 months in prison when they are sentenced June 17.

However, Fisher said Stewart could draw a longer sentence of 18 to 24 months if it is determined she substantially interfered with the ImClone probe.

Defence lawyers are expected to seek a lighter sentence.

"A good argument will be that this was aberrant conduct," Fisher said. "She has led a spectacular life ... in the course of a lifetime, she has given much to society."

Cohen said that while it is possible Cedarbaum could sentence her to home confinement, his guess is that she might be given a maximum of 13 months.

"She will come out of a jail a very wealthy woman," he said. "She will survive. Even her professional career will survive."

FROM THE STAR'S WIRE SERVICES

On "Good Morning America" today, two of the jurors in the case refused to second-guess their verdict. Rosemary McMahon, Stewart Jury Forewoman: "The verdict, I think, we reached after careful consideration of everything that we had: All of the evidence, all of the testimony and a lot of talking."

Amos Mellinger, Stewart Juror: "I thought since she had the best legal team she could put together, both of the defendants did, and if that is the strategy they took, I wasn't going to try to second guess it."

Experts we spoke with say grounds for appeal are extremely limited and so are her chances for success.
(Interactive: Timeline in the Case)

Alan Dershowitz, Legal Analyst: "In a case like this, it may be in the 20 percent range but it's certainly no higher than 20 to 25 percent."

http://abclocal.go.com/wabc/news/wabc_stewart_030804meeting.html

From your posted article: "A good argument will be that this was aberrant conduct," Fisher said. "She has led a spectacular life ... in the course of a lifetime, she has given much to society."

Whereupon the state can introduce all evidence it has to the contrary (at an appeals hearing that is in the public record). I'm not so sure Martha's lawyers want to open that door. Among other things, she is reputed to have been a tax evader who was finally brought to heel by NY state. A lot of effort is being put into making her out to be a saint and the media are cooperating in that project. Why would the defense hand that microphone to their adversaries?