March 10, 2004

Martha Stewart and The Search For Meaning

By Dan Ackman

The conviction of Martha Stewart has set off a frantic search for what it all means.

Pundits point to "lessons" that will supposedly reverberate in the legal system, in the stock market, in corporate boardrooms and in the defense bar.

In fact, Stewart's downfall was essentially personal, and the lessons may be hers alone. The early indication, though, is that even she has failed to learn.

Let's start with the defense. Stewart's lawyer, Robert Morvillo, has come under attack from Monday morning litigators who wonder how he could have not put his client on the stand. They cite statements from juror Chappell Hartridge, who said he would have liked to see Stewart testify, but ignore that Hartridge also said he never expected her to do so.

Of course, in retrospect, Stewart testifying couldn't have hurt. But before the fact, there was reason to believe that, had she testified, evidence like her chiseling on expense reports - which was reported in the press, but not to the jury - would have been admitted. And who knows better than her own lawyers how Stewart would have responded to cross-examination?

Anyone who saw her response to CBS morning show host Jane Clayson on CBS' "The Early Show" (the famed June 2002 "I want to focus on my salad" interview) should not doubt Stewart might react quite badly to a prosecutorial challenge to her authority. Or maybe she was just trying to avoid perjury.

As someone who covered the trial, I can state confidently that nearly every reporter at the proceeding thought the verdict could have gone either way. The reason was that Stewart's defense team, as well as lawyers for her co-defendant, Peter Bacanovic, presented a strong challenge to every piece of evidence.

While Stewart's lawyers called just one witness, they made good use of the witnesses called by Bacanovic, and even by the government.

The suggestion that her lawyers horribly misjudged the case only seems true after the fact. Besides, those same lawyers got the most serious charge, securities fraud, thrown out.

The immediate press reaction to the verdict was to characterize it as part of "an era of spectacular corporate corruption," as the latest Time magazine glibly put it.

But, of course, there was nothing corporate about Stewart's crime. She traded not in her own company's shares, but in the shares of a company, ImClone Systems, founded by a friend, Sam Waksal. The inside tip came not because she was a CEO, but because she shared the same broker as that friend. This was personal, not business.

After the verdict, U.S. Attorney David Kelley said the case will help convince Americans "that they can invest their money safely and securely."

How exactly are Americans to be convinced? Waksal's own daughter traded shares of ImClone, a biopharmaceutical company, the same day Stewart did, and without legal consequence - at least not so far. Indeed, more than 7 million shares changed hands on the fateful date, Dec. 27, 2001.

While it's no defense of Stewart, it's hard to believe some of the sellers didn't have an inkling of the calamity - a negative decision from the FDA - that was about to befall ImClone. None have been exposed or prosecuted.

On the courthouse steps, Kelley said, "When we first indicted this case, we said it was all about lies. It was all about lies. And as you saw in the evidence, that is what it was." Maybe for him. The rest of us were focused on celebrity.

If anyone should have learned not to lie, or be self-serving, it's Stewart. But it looks like she has not.

Even after the verdict, Stewart was making statements and then hastily erasing them. On her Web site she wrote, "I am obviously distressed by the jury's verdict, but I continue to take comfort in knowing that I have done nothing wrong ..." Within an hour she erased the "done nothing wrong" part, perhaps advised that now was the time to show contrition.

During the trial, one of the most damning pieces of evidence against Stewart was that she altered the message in a phone log, even though the original message was harmless, and even though she immediately ordered her assistant to change it back. Sure, forced contrition is phony, but sentencing judges demand it.

Either Stewart is just too honest in refusing to play the game, or she just won't learn.

Dan Ackman, a journalist and lawyer, covered the Stewart trial for Forbes.com.