Guilty Stewart facing prison

MARTHA STEWART was convicted last night of obstructing justice and lying to the US government about a superbly-timed stock sale — a devastating verdict that probably means prison for the woman who epitomises meticulous homemaking and gracious living.

Stewart was found guilty of conspiracy, making false statements and obstruction of justice. The charges carry up to 20 years in prison sentencing is set for June 17 but she will most certainly get much less than that under federal sentencing guidelines.

Her former stockbroker, Peter Bacanovic, aged 41, was convicted of conspiracy, perjury, making a false statement and obstruction of justice, but was acquitted of making a false document.

Stewart grimaced upon hearing the verdict, and her eyes widened.

"I am obviously distressed by the jury's verdict but I continue to take comfort in knowing that I have done nothing wrong," Stewart said in a statement on her website. "I will appeal the verdict and continue to fight to clear my name. I believe in the fairness of the judicial system and remain confident that I will ultimately prevail."

The jury of eight women and four men reached the verdicts on the third day of deliberations in the case.

Trading in her company, Martha Stewart Living Omnimedia, was halted after the verdict. Earlier the stock shot up on word of a verdict.

The charges centered on why Stewart dumped about $228,000 worth of ImClone Systems stock on December 27, 2001, just a day before it was announced that the Food and Drug Administration had rejected ImClone's application for approval of a cancer drug. The announcement sent ImClone's stock plummeting.

Stewart and Bacanovic claimed they had a standing agreement to sell when the price fell below $60. But the government contended that was a phoney cover story and that Stewart sold because she was tipped by her broker that ImClone CEO Sam Waksal was frantically trying to dump his own holdings.

Waksal admitted selling his stock based on advance word of the FDA decision. He is serving seven years in prison for insider trading.

Stewart, who averted more than $51,000 in losses by selling when she did, was not charged with insider trading; instead, she and her broker were accused of lying about the transaction and altering records to support the alleged cover story.

The government now may press to have her removed from the board of her company. She stepped down as chief executive after being indicted last summer but remains as chief creative officer.

The verdict jeopardises the media empire that Stewart carefully built over the years in becoming the nation's premier homemaker an image she put forth by way of magazines, TV programmes and everything from cookie cutters and garlic presses to bedsheets and pillows. Marketing experts have said that the company is so closely tied to her name and face that the effect could be devastating.

Stewart was easily the most recognisable face in the government crackdown on corporate crime that began with the collapse of Enron in 2001. Stewart's supporters claim she was being targeted because of her celebrity status.

The government's star witness was Douglas Faneuil, a former Merrill Lynch & Co assistant, who said he passed the tip about Waksal to Stewart on orders from his boss, Bacanovic. Faneuil said that when he told Bacanovic about a flurry of selling by the Waksal family, Bacanovic blurted: "Oh my God, get Martha on the phone."