MARTHA STEWART GUILTY ON ALL COUNTS

Verdict Expected to Impact Her Already-Troubled Company

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NEW YORK (AdAge.com) -- Publishing mogul and domesticity marketing icon Martha Stewart was found guilty on all charges this afternoon.
Photo: AP
Martha Stewart outside the Manhattan federal court house.
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Ms. Stewart was on trial in Manhattan federal court on four counts of perjury and obstruction of justice. Sentencing is scheduled for June 7.

Three-day deliberation
Shortly before 3 p.m. the eight-woman, four-man jury returned to the courtroom in Manhattan after three days of deliberation to pronounce her guilty on all charges.

TV commentators reported Ms. Stewart was expressionless as the verdict was read.

The Associated Press reported that she said nothing to her defense team as she left the courtroom to compose herself in a holding room beyond media scrutiny.

'Obviously distressed'
Shortly after that, Ms. Stewart issued a personal statement saying, "I am obviously distressed by the jury's verdict. ... I will appeal the verdict and continue to fight to clear my name."

In a separate statement, her company, Martha Stewart Living Omnimedia, said, "We are deeply saddened by the news of Martha Stewart's conviction, and our thoughts are with her in this difficult time. Our Board of Directors will meet promptly to carefully evaluate the current situation and take actions as appropriate."

The 62-year-old Ms. Stewart was on trial for charges related to the federal investigation of her sale of Imclone Systems stock in December 2001.

The verdict is expected to further devastate Martha Stewart Living Omnimedia, which has already suffered mightily due to Ms. Stewart's legal woes.

Stock trading halted
Trading of the company's stock was halted by the New York Stock Exchange shortly after the verdict was read. The stock had been idling most of the day until the Associated Press reported a verdict was imminent. It rose nearly 19% to $16.70, a 52-week high, in the hour between the AP bulletin and the verdict. Pundits speculated the surge was due to traders assuming the short deliberation meant an acquittal.

In an earning call with investors yesterday, Martha Stewart Omnimedia CEO Sharon Patrick took pains to stress that the company had been working on "contingency planning" in the wake of the trial's potential outcome. She did not disclose what those plans may be, though she said the company would "measure impact on consumers" and "listen carefully to the point of view of advertisers and partners, evaluate the impact and make decisions consistent with management philosophy."

Awaiting advertiser reaction
"Advertisers were taking a wait-and-see" stance, said Charles Valan, vice president of strategic print services at Universal McCann, New York. "Now they see. You have to imagine there will be a second wave coming through that are going to say, 'OK. Now it's proven guilty. And how am I going to react to that?'

"Odds are that based on the first reaction, you have to imagine the next will be more [advertising] fall-off," Mr. Valan said. "It's just a natural progression."

Martha, the marketing icon
The decision is expected to force the company's hand to address a key point of its core identity: separating the business from Ms. Stewart's image. Recently, the company moved to put forward new personalities, such as TV pet expert and host Marc Morrone, but all aspects of Martha Stewart Living Omnimedia is still associated with Ms. Stewart's face and sensibility -- and this still registers on marketers.

"This is going to be a huge challenge for the company," said Brenda White, media director at Starcom, Chicago. "It will be interesting to see whether and how they separate the Martha Stewart brand from Martha Stewart the person."

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