Stewart Gets 5 Months in Prison, Then Delivers a Plug for Her Firm

Martha Stewart on Friday received a sentence of five months in prison plus five months’ home confinement, then emerged from a Manhattan courthouse with an air of defiance -- and, jarringly to some, a sales pitch.

Speaking out after declining to take the stand at her trial, Stewart told a throng of reporters and onlookers: “I’m just very, very sorry that it’s come to this, that a small personal matter has been able to be blown out of all proportion, and with such venom and such gore -- I mean, it’s just terrible.”

Stewart, who will remain free pending an appeal, expressed concern for her employees and thanked who she said were the many thousands of people who had written or e-mailed their good wishes.

She suggested that they continue their support “by subscribing to our magazine, by buying our products, by encouraging our advertisers to come back.”

Wall Street didn’t wait for Stewart’s speech to bet on a comeback for her image and her business. As soon as news of her lighter-than-expected sentence was out, shares of Stewart’s media company, Martha Stewart Living Omnimedia Inc., began soaring to their highest price level since her March 5 conviction.

Earlier, during her sentencing hearing before U.S. District Judge Miriam Goldman Cedarbaum, a black-clad Stewart had shown a more conciliatory face.

“Today is a shameful day,” she told Cedarbaum, later adding, “I ask that in judging me, you remember all the good I’ve done and the contributions I’ve made.”

The judge rejected Stewart’s request for community service as a substitute for prison time, opting instead for the minimum sentence under federal guidelines -- 10 months’ total confinement.

“I believe that you have suffered, and will continue to suffer, enough,” Cedarbaum said. She also imposed a $30,000 fine.

Cedarbaum granted Stewart the concession of allowing her to remain free pending an appeal of her conviction. Given the clogged calendar of the U.S. 2nd Circuit Court of Appeals, legal experts said it could be as long as two years before Stewart would begin her prison term.

Stewart’s co-defendant and former stockbroker, Peter E. Bacanovic, received a near-identical sentence of five months in prison and five months of home confinement, plus a $4,000 fine. Bacanovic was sentenced in a separate hearing Friday afternoon. He also will remain free pending appeal.

Stewart and Bacanovic were convicted of conspiracy, obstruction and lying to investigators in an attempt to conceal the circumstances of Stewart’s December 2001 sale of stock in biotechnology firm ImClone Systems Inc., then run by her close friend Samuel D. Waksal. Stewart dumped her shares a day before an adverse regulatory ruling that caused ImClone’s stock to tumble.

Investigators initially suspected Stewart of insider trading on a tip from Waksal, but they ultimately charged her only with the cover-up. That quirk led her defense team to contend that she was unfairly being prosecuted for lying about a crime she didn’t commit.

Stewart defense lawyer Robert G. Morvillo, pleading Friday for a sentence reduction, told Cedarbaum that Stewart had learned what it was like “to get up almost every morning of your life and face ridicule, scorn and accusation heaped upon accusation.”

Stewart, he said, is a woman who has inspired millions and whose decorating and entertaining skills “brought a measure of beauty” into people’s lives.

Chief prosecutor Karen Patton Seymour countered that Stewart was “asking for leniency far beyond” what a non-celebrity defendant would receive for “a serious offense with broad implications” for the justice system.

At Stewart’s request, Cedarbaum said she would recommend that her prison term be served at the minimum-security federal work camp in Danbury, Conn., about 70 miles north of Manhattan. The judge’s recommendation carries weight, but the final decision is up to the U.S. Bureau of Prisons, a branch of the Justice Department.

Stewart, who owns several residences, chose to serve her home confinement at her estate in semirural Bedford, N.Y., where she has been restoring an old farm property in the village of Katonah. Nearby neighbors include designer Ralph Lauren and financier George Soros.

During those five months, she will be permitted to be away from home no more than 48 hours a week, and then only for approved activities such as work, doctor visits and shopping. She may be required to wear an electronic ankle bracelet so that her whereabouts can be tracked.

During her home confinement, Stewart must have in her house a non-portable phone -- free of call forwarding and answering devices -- so that authorities could use it as a direct line to check that she was home when she was supposed to be.

Outside the courthouse, Stewart’s fans cheered her appearance and deplored her jail sentence.

As a housing inspector in Camden, N.J., “I see some nasty things,” said supporter Linda Smith. “Martha Stewart’s shows have brightened up my life a little bit.”

But two former federal prosecutors said the sentence was as light as could reasonably be expected.

Stewart “got every break that Miriam Goldman Cedarbaum could throw her way,” said George Newhouse, a criminal-defense lawyer and partner at Thelen Reid & Priest in Los Angeles.

Stewart’s repeated referral to her offense as a “small personal matter” struck Newhouse as “an astounding statement of defiance and a perfect demonstration that she has not come to grips with the gravity of her situation.”

Most surprising to Newhouse, who watched Stewart’s courthouse statement on television, was to see her segue into a pitch for Martha Stewart Living magazine.

“She’s actually trying to parlay this into a commercial success, God bless her,” he said.

Former prosecutor Joseph Warin of Gibson, Dunn & Crutcher in Washington was also taken aback by the sales pitch. He added that Stewart’s combative attitude after having received a minimal sentence was “a little bit of a poke in the eye” to Judge Cedarbaum.

But what some took as defiance was an exhibition of the kind of leadership that Stewart’s company and admirers have been starving for, said Jeffrey A. Sonnenfeld, an associate dean at the Yale School of Management and head of its Chief Executive Leadership Institute.

“Regardless of how wounded or beaten down they are personally, leaders have to show their people that they can get up and move ahead,” he said.

Stewart proved that she still had “the heroic mettle” to inspire her troops, said Sonnenfeld, who has met Stewart several times at Yale business conferences and had lunch with her several weeks ago in the resort town of East Hampton, N.Y.

Stewart explicitly tried to rally her troops in her five-minute speech, saying: “I’ll be back. I will be back. Whatever I have to do in the next few months, I hope the months go by quickly. I’m used to all kinds of hard work, as you know, and I’m not afraid. I’m not afraid whatsoever.”

Bacanovic’s sentencing, by contrast, played to a far smaller courtroom audience. There was no appearance before the microphones afterward.

“This has been a horrible ordeal for me and for my family,” the ex-broker said in a statement released Friday. “I greatly mourn the loss of my freedom and of my privacy.” Bacanovic also plans an appeal, his lawyer said.

Both defendants intend to argue that the trial was tainted by the alleged false testimony of expert prosecution witness Larry F. Stewart (no relation to Martha Stewart), director of a Secret Service laboratory that did an ink analysis on an incriminating brokerage document. The former lab director was charged in May with two counts of perjury.

Lawyers also will cite juror Chappell Hartridge’s alleged failure during pretrial questioning to disclose an arrest for assault.