Posted on 08/22/2003 9:42:54 PM PDT by Pan_Yans Wife
Her trial is next year, but Martha Stewart's empire has already begun a sentence of poor results, writes Simon English
Anyone who thinks there is no such thing as bad publicity should consult Martha Stewart. It is 20 months since America's domestic goddess - think Delia Smith on rocket fuel - made a calamitous share trade that has ruined her life.
Martha Stewart: her personal legal difficulties have had a catastrophic effect on the business she founded Since then she has faced a barrage of negative press that has driven her underground and which threatens the future of the business she founded.
Last week Martha Stewart Living Omnimedia, the media and publishing empire in which she holds a majority stake, recorded its third terrible quarter in the last four.
Profits plunged by 86pc as advertising revenue dried up and the merchandising arm crumbled. The company barely scraped into the black with net income of $931,000 and warned that heavy losses are on the way as the business remains "under pressure" from the founder's legal difficulties.
Martha's morning TV show is being shifted to the post midnight graveyard slot, an indication that viewing figures are down and that advertisers don't want to be associated with the brand.
There is some support from Wall Street but it is not exactly enthusiastic. The best Morgan Stanley's analyst Douglas Arthur could offer is that "things are not bright but they are hanging in there".
The problems began in December 2001 when Martha - like Madonna or Oprah her first name suffices - was told by a stockbroker that her good friend Sam Waksal was selling shares in ImClone Systems, the drug company where he was chief executive.
She followed suit, one day before the US government rejected the company's cancer drug Erbitux, a decision that left ImClone tottering.
Later, investigators found she had altered phone and computer records and placed curious calls to Mr Waksal who is now in jail for securities fraud.
Her claim that she had a standing order to sell ImClone shares once they dipped below $60 has not been corroborated by any official paperwork. In any case, her 3,928 shares fetched $58 each.
Despite the extraordinary furore, the case against Martha looks rather thin. She isn't charged with insider trading, just with lying about the circumstances behind what was, presumably, a perfectly legal stock sale.
In other words, she faces criminal charges for impeding an investigation that couldn't come up with enough evidence to find her guilty of the initial allegation.
One of the charges is that by declaring herself innocent she deceived investors in her own company, an accusation that looks ridiculous and suggests the US Justice Department is straining. The trial is set for January and a prison sentence for obstructing justice is a real possibility.
The US is gripped by the spectacle, asking if the most famous woman in America is really a liar and a crook.
Moreover, can Martha bounce back? Neil Morgan, a business professor at the University of North Carolina, says: "My suspicion is that she can. The question about the company is much more in the air, it has a real uphill battle.
The brand is tied to a person. Even if the case goes away, there is no question she has been parsimonious with the truth, which wipes out the brand value.
"They established this association with Martha, now they are trapped by it. It would be easier to start with a blank piece of paper."
The company's initial attempt to do this is the launch of Everyday Food next month, the first magazine not to feature Stewart's name. It is as likely to succeed in the tough publishing world as any other but most new magazines fail.
Mike Paul, president of New York PR firm MGP & Associates, believes Martha could have made it through the crisis if she had been properly advised.
"Martha the company and the public figure will never be the same again. In the world of reputation management it is sometimes hard to quantify how big a hit you have taken.
She should have come right out and said, 'I made a huge mistake' and described herself as a former stockbroker before everyone else did. Today she is like the wicked witch from The Wizard of Oz crying 'I'm melting, I'm melting'."
By going quiet, Mr Paul believes she created a void to be filled with negative information. "We are a forgiving public when we hear the truth, we are not when we have a lot of doubt," he says.
As the trial date nears, other embarrassing incidents may leak out, making the gap between the image of Martha - an impossible vision of flawlessness - and the real human being ever larger.
Says Paul: "Even though she was known as difficult, she was positioned as a perfect person. People don't want to be shamed. They are saying, I never knew this was the real Martha."
The days when Martha would be invited to lunch with the President of the United States or to sit on the board of the New York Stock Exchange are certainly over.
The list of people pleased by her fall from grace is long. Two unauthorised biographies paint a less then pretty picture of a woman who made enemies as often as she baked cakes.
According to Christopher Byron, the author of Martha Inc, by the mid 1990s Martha's personal behaviour "was the elephant in the room that nobody wanted to discuss". The elephant got bigger.
Just Desserts by Jerry Oppenheimer describes a scheming woman with a ferocious temper who lied about herself and others as a matter of routine.
A National Enquirer headline from 1997 stated: "Martha Stewart is Mentally Ill". She sued, but later dropped the case.
Examples of her frenetic rows and allegedly foul language are likely to be dredged up before long.
None of which proves she is guilty of anything criminal, but all of which seems likely to end the notion of Martha as a chief executive, TV personality, gourmet cook, model, and living embodiment of perfect American womanhood.
In turn, that looks like doom for the business bearing her name. The company's shares have halved, cutting her net worth by at least $400m. The stress has been huge and Martha is beginning to look her age (she is 62). Even if she escapes punishment, retirement may beckon.
Some have accused the SEC and the Justice Department of sexism, asking why the same energy has not been put into pursuing executives at Enron and WorldCom, where the crime was undoubtedly greater.
Martha's misfortune is that while mysterious people at Enron were doing incomprehensible things with energy derivatives, hers was the white-collar crime to which the public could relate. The Kitchen Queen had been accused of insider trading - hold the front page.
People who have never seen her TV show, bought one of her magazines or tried one of her recipes are interested in her fate. Martha Stewart Living Omnimedia was never comparable to Enron in size, but it was more famous and for a long time it was phenomenally successful.
The chief executive, now chief creative officer, sold her gardening, home-making and cooking skills to a loving public who lapped up the whole idea of Martha.
The TV shows advertised the magazines, which advertised the mail order business which sold the cooking and gardening books. It was a synergistic business long before media executives started bandying that word around.
Her success was such that it is some time since she has done any of the menial work that goes into cooking or entertaining - Martha's job was to promote Martha.
If things go badly next January, cooking and cleaning could be back on the agenda in far less pleasant surroundings than Martha is used to.
She had a responsibility to set the example and guard the chicken house --not to act like the fox.
Now, throw in the fact that she was, whilst selling stock in an insider trading fraud, a member of the board of the NYSE !
Rather juicy little artcle. LOL
I don't think the song ever really said what the solution was.
Errr, wait - that was "how do you solve a problem like Maria?". Dunno about Martha - six months of eight-hour days working in a soup kitchen might be a good start. Teach her a little humility.
None of that making lace doilies for the guests BS, though - she gets to be in charge of the corned-beef hash and the lime jello. If she behaves and starts acting like a normal human, she can get promoted to the chipped-beef crew.
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