Choosing among all of those Martha Stewarts
Her posture is perfect: head high, shoulders squared, never slouching in her chair during even the most tedious hours of testimony. She never has a bad hair day.
Yet the courtroom artists find Martha Stewart hard to draw. Her face, lively and beautiful on TV and in her magazine, emerges as taut and severe in their drawings. It isn’t a question of poor draftsmanship. On trial, with her freedom and fortune on the line, Martha Stewart looks like a different person.
Today, Stewart’s top lawyer and the lead prosecutor will paint their opposing portraits of the media entrepreneur and her actions between her now-notorious sale of ImClone Systems Inc. stock on Dec. 27, 2001, and her interview with federal investigators the following April.
Is Stewart the victim of a trophy-hunting U.S. Justice Department, or a shrewish multimillionaire who thinks the rules don’t apply to her?
Defense lawyer Robert G. Morvillo and Assistant U.S. Atty. Karen Patton Seymour will draw on the same five weeks of testimony and documentary evidence to make their cases today to a racially mixed jury of eight women and four men. Even before those arguments begin, however, enough has been seen and said of Stewart in the courtroom to get a sense of how she might strike jurors as a defendant, a chief executive, a friend and an investor.
Stewart as defendant
In court, the former advertising model (“Us Tareyton smokers would rather fight than switch”) shows barely a touch of color in her wardrobe. She mainly confines herself to brown or dark gray pantsuits with equally somber tops and shoes. Her jewelry is subdued.
Stewart rarely smiles while court is in session, although she has permitted herself to chuckle along with the jury at times -- notably when her former stockbroker’s aide, Douglas Faneuil, described a Stewart tirade over the “hold music” on the Merrill Lynch & Co. phone system. She didn’t laugh when Faneuil described another Stewart outburst in which, he testified, she made a noise “like a lion roaring underwater.”
During testimony, Stewart sometimes jots notes on a pad or murmurs to one of her lawyers. During breaks, she chats quietly with friends, relatives or members of her legal team. She never makes a broad gesture. She seldom attempts eye contact with jurors. She did not take the witness stand in her defense. The jury has never heard her voice.
In short, it would be hard to find a celebrity who has worked harder to fade into the background.
Stewart’s defense is all about power, said Washington-based securities lawyer Howard Schiffman, who is not involved in the case. Morvillo argues that Stewart has been targeted by a powerful and vindictive federal government. He has twice mentioned the name of Atty. Gen. John Ashcroft to the jury, and the betting is that he will name him again in today’s closing statement.
If that’s the defense, Schiffman said, then you work against the image of Stewart as the short-tempered ruler of a mighty business empire. “Not vain. Not arrogant. You make her as small and as likable as you can.”
As chief executive
A rule at the midtown Manhattan office of Martha Stewart Living Omnimedia Inc. -- one of three MSLO offices -- was that callers dialing Stewart’s direct number between 8 a.m. and 8 p.m. should always reach a human voice. “We tried never to let that line go into voicemail,” testified Ann E. Armstrong, Stewart’s personal assistant.
The practical effect for Armstrong, whose job was to answer that phone, was that she had to be at her desk at least 12 hours a day, even though Stewart worked at the midtown office only two days a week. There was no designated backup. Armstrong said she eventually got a co-worker -- “as a favor” -- to staff the desk for the first 90 minutes each morning, “so I didn’t have to start at 8 and end at 8.”
Yet it was Armstrong, evidently feeling a twinge of loyalty, who broke down in tears on the stand recalling a modest gift -- a plum pudding -- that Stewart gave her and other employees for Christmas 2001.
Prosecutors made much of a $20,000 raise that Heidi DeLuca, Stewart’s Westport, Conn.-based business manager, received in 2002. The salary bump was DeLuca’s reward, they claimed, for corroborating the boss’ story that Stewart had a prior agreement with her broker to sell ImClone if it fell to $60 a share.
Another way to look at it was that DeLuca, who juggled taxes, bank statements and bookkeeping for Stewart’s corporate and personal affairs, had been egregiously underpaid in 2001, when she earned $72,000, and Stewart was trying to make amends.
Stewart, then, may have come across as a demanding and not always generous boss, but the government has struggled to get her employees to say anything against her. DeLuca, in the face of a withering cross-examination last week, clung to her contention that there had been an agreement to sell the stock if it fell to $60.
James Follo, MSLO chief financial officer, testified that he sometimes sparred with Stewart over certain of her expense-account items -- including haircuts -- that he thought shouldn’t be charged to the company, but he resisted prosecutors’ efforts to elicit examples of Stewart grabbing for petty cash.
“We’re not seeing anything different than with any other CEO,” said Paul Argenti, a management professor at Dartmouth’s Tuck School of Business. Argenti previously worked at Kmart Corp. and knew Stewart from her retailing partnership there.
“CEOs as a class are very demanding,” he said, “and when they come down on you, it’s like a ton of bricks.”
As a friend
Courtroom visits by celebrities such as Bill Cosby and Rosie O’Donnell caused a stir in the courtroom, but Stewart also has had the in-person support of other friends, including the prominent Manhattan art dealer Richard L. Feigen and actor Brian Dennehy, who said he worked with Stewart at a Wall Street brokerage 30 years ago.
Among the socialites who moved in Stewart’s circle was ImClone founder Samuel D. Waksal, now doing seven years in prison for insider trading in the biotech firm’s shares. According to testimony, the two met through Stewart’s daughter, Alexis, who used to date Waksal.
One of Stewart’s closest friends, Mariana Pasternak, arrived at the trial in a less supportive role, as a key witness for the prosecution.
Pasternak testified that within a few days of Stewart’s ImClone sale, while they were on vacation at a luxury resort in Mexico, Stewart confided that she was aware of Waksal’s attempts to sell his own ImClone stock.
It was during the same conversation, Pasternak said, that either she or Stewart remarked: “Here we are again, just the two of us on a holiday trip with no male companionship.”
As stock investor
During the tech-stock boom of the late 1990s, Stewart held many of the same cocktail-party favorites as other soon-to-be-sorry investors: Avenue A Inc., Digex Inc., Doubleclick Inc., Palm Inc., Sycamore Networks Inc. They didn’t all go out of business, but they all skidded horribly when the bubble burst.
In late 2000, when tech stocks were in bloody retreat, Stewart wrote an e-mail to her then-broker and now co-defendant, Peter E. Bacanovic, that seemed to blame him for her losses.
“I think it’s time for me to give my money to a professional money manager who will watch it when I am too busy and will take a bit more care about overall market conditions and political and economic problems,” Stewart wrote. “We have just watched the slide and done nothing and I’m none too happy. I’ve made two or three horrendous mistakes and not sold when I was still far ahead.”
A year later, according to testimony, Stewart agreed to sell a large block of ImClone stock after extensive discussions with Bacanovic. The next day, she noticed that the stock had ticked slightly upward and was irked to have sold at the lower price.
“See what I have to deal with?” Bacanovic told Faneuil.
Professor Meir Statman of Santa Clara University has heard all this before. As a specialist in the developing field of behavioral finance, he studies how psychology affects investors.
“The big advantage of having brokers is you can blame them,” Statman said. “If the stock goes up, it’s your smart investment. If it does down, it’s your stupid broker. Martha Stewart does that, and Bacanovic understands it. But it’s never really enjoyable.”
Stewart’s complaint may have stuck in Bacanovic’s mind. Two months later, according to testimony, Faneuil told him that ImClone’s stock price was falling and that the biotech firm’s founder was anxiously trying to sell his shares. Bacanovic knew that Stewart still held 3,928 ImClone shares.
“Oh, my God,” he said, according to Faneuil, “get Martha on the phone.”
