Risk Management

Martha Stewart Sentenced to Five Months

Her prison term will be followed by two years' supervised probation, which includes five months' home confinement. Stewart had faced up to five yea...
Dave CookJuly 16, 2004

Martha Stewart — the namesake, a former director, and the former chief creative officer of Martha Stewart Living Omnimedia Inc. — was sentenced this morning to five months in prison by U.S. District Judge Miriam Goldman Cedarbaum. Stewart will then serve two years of supervised probation, which includes five months of home confinement. She was also fined $30,000.

Stewart had faced up to five years in prison on each of four counts; federal sentencing guidelines called for a term of between 10 and 16 months.

Her co-defendant and stockbroker, Peter Bacanovic, was also sentenced to five months in prison and two years of supervised probation and fined $4,000.

In March, a jury found Stewart guilty of one count of conspiracy, two counts of making false statements, and one count of obstruction of agency proceedings in her trial over a suspicious sale of stock in ImClone Systems Inc., according to Reuters. Bacanovic was found guilty on four of five counts.

Stewart had sold stock in the biopharmaceutical company in December 2001, shortly before a public announcement by the Food and Drug Administration denying approval of a key ImClone product.

Her sentencing, originally scheduled for June, was pushed back so her lawyers could present arguments for a new trial based on the alleged perjury of a prosecution witness. In her ruling last week denying the defense motion, Judge Cedarbaum wrote that “there is no reasonable likelihood that this perjury could have affected the jury’s verdict” and that the verdict is supported by “overwhelming independent evidence.”

Judge Cedarbaum issued a stay delaying Stewart’s sentence while her lawyers file an expected appeal, according to CNN; they have 10 days to do so, the report added. Only about 3 percent of federal criminal convictions are overturned on appeal, according to The New York Times.

A final note: On December 27, 2001, when Stewart sold her 3,928 shares of ImClone Systems, she received an average $58.43 per share, according to CNN, for a total of about $229,000. On December 31, the first trading day after the FDA’s announcement, ImClone shares fell 18 percent, reported the Associated Press.

Thursday, however, ImClone closed at 79.89. Had Stewart not sold her shares, her holding would be worth about $314,000.

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