Fallen icon: Martha Stewart is found guilty of insider trading

Martha Stewart, the television celebrity and cultural icon, who for 20 years has coached American women on how to keep the perfect home, was found guilty of all four charges lodged against her in her stock-trading trial in New York. The verdict will almost certainly bring a punishment of time in prison.

A jury of eight women and four men took barely two days to reach their decision in a case that has riveted the American media for the past several weeks. Also found guilty in the same trial was Stewart's former broker, Peter Bacanovic. He was convicted of four out of five charges filed against him.

For the US government, which finds itself pursuing a raft of high-profile white-collar cases all at the same time, the outcome was a landmark victory. Questions had been raised about a case that turned on a relatively small amount of money and seemed targeted on a personality only because of her fame.

Word that a verdict had been reached broke inside the lower Manhattan court building just after the lunch hour yesterday. Reporters and other observers in the federal courthouse remained in suspense for an hour as they waited for Judge Miriam Cedarbaum to reconvene the court to hear from the jury foreman. Outside, scores of New York City police erected barricades to keep away expected crowds of onlookers.

Such was the apparent confidence of Stewart's defence team that it brought only one witness of its own to the stand and questioned him for 17 minutes. Her lead lawyer, Robert Morvillo, declared that he had no need to do more because the government had failed to provide the evidence to convict his client.

But the jury saw things very differently. It had heard from a long line of prosecution witnesses who had offered testimony that both directly supported the contentions of the government and often helped to darken the reputation of a woman who once was hailed as the archetype of domestic perfection. They heard of her overbearing manner, her terrible telephone manners and her buying of coffee on company expenses.

The downfall of Stewart, born to Polish immigrants with the more prosaic name of Martha Kostrya, dates back to 27 December 2001. That was the day, the prosecution explained, that she got a warning from Bacanovic that it was time to sell the shares, worth about $230,000, that she held in an until-then soaring biotech company called ImClone.

Bacanovic, through his assistant Douglas Faneuil, told Stewart that the chief executive of ImClone and a personal friend of hers, Sam Waksal, was offloading his shares on that day. The timing was superb - and, ultimately catastrophic - for Stewart, because the very next day the government announced it was withholding approval for a key ImClone drug, a decision that sent its shares plummeting.

If this looked fishy, then federal investigators certainly thought so. But at trial, Stewart and Bacanovic had an excuse. They said they had previously agreed that he would ditch Stewart's shares at the moment they dropped below $60 each. But it was a story that the jury evidently did not buy.

The prosecution accused the pair of insider trading. One charge that was filed - that Stewart lied in the months after the sale to protect the share price of her own company, Martha Stewart Living Omnimedia - was thrown out by Judge Cedarbaum last week. But all four remaining charges finally stuck.

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

There were no histrionics as the verdicts were read. But Stewart's daughter, Alexis, who had been in court through most of the trial, dropped her head and cried. Her mother, who had spent most of the intervening hour checking her watch and nervously twirling a pen in her fingers, visibly grimaced 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," she 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.

"I can't tell you how much I appreciate all the words of encouragement I have received from thousands of supporters. It is your continued support that will keep me going until I am completely exonerated."

The defence was always fearful that Stewart's celebrity may count against her. And first comments last night from one of the jurors may have born that out. "Maybe it's a victory for the little guys who lose money in the market because of these kinds of transactions," said juror Chappell Hartridge.

The verdict came on a volatile day of trading in her company, Martha Stewart Living Omnimedia. The stock shot up on word of a verdict, then trading was briefly halted. The stock plummeted after trading resumed.

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

Jurors heard how Stewart once referred to Mr Faneuil as a "little shit" and told him on one occasion that she would leave Merrill Lynch because she didn't like the music she heard when she was put on hold on the telephone. Meanwhile, jurors saw e-mails from Mr Faneuil to friends detailing his struggles with the client from hell. "Martha yelled at me again today," he wrote in one, "but I snapped in her face and she actually backed down. Baby put Martha in her place!!!"

The consequences of the verdicts for Stewart's media empire are certain to be devastating. Over 20 years, she built her company, born of a small catering business in Connecticut, into a publishing, broadcasting and franchising powerhouse. There were magazines, television shows, books and an internet site all dedicated to promulgating the myth of Stewart herself and her oracle-like visions of gracious home-keeping. Her products, from duvet covers to cups, have for years filled the aisles of Kmart.

The ImClone saga forced her to relinquish her post as chief executive officer of her company last June, but she remained on the board and essentially kept her hands on the tiller.

The company now faces that rare dilemma: how to proceed when the person who is your brand has been disgraced?

Stewart, whose own life, though marred by a divorce, seemed a dream of luxury, privilege and high-society connections, instructed all of America on everything it had to know on keeping the home in good and fashionable order.

It was Martha who taught us that nail scissors were just the thing for snipping around egg whites to create the ideal eggs benedict. There has never been an equivalent figure in British culture. Sometimes comparisons were drawn with Delia Smith, but they were never fully adequate.

America will now digest with shock the notion that a woman used to the high privet hedges of the Hamptons, on the posh end of Long Island, may one day soon have nothing more to do than contemplate the perfectly folded bed blanket in a barred cell in prison. Her fans will be distraught. But Americans can be as gleeful as anyone else when the powerful and rich stumble and fall flat on their faces.

Indeed, the national outbreak of schadenfreude in this case has been obvious since the beginning. Ms Perfect had become Ms Cheater and Crook. Even before the trial, there was a whole cottage industry of books, one-off magazines and websites dedicated to lampooning the unattainable nirvana of goody Ms Stewart. And we have not even mentioned the catalogue of late-night TV jokes made at her expense.

The unfavourable exposure also extended to two often damning, unauthorised biographies as well as a recent television movie of her life, with Cybill Shepherd portraying her as an unbearable shrew.

That Stewart always had ambition has never been questioned. She grew up in lower middle-class surroundings, even making her own dresses for school. But many yesterday were recalling a little aphorism she wrote for herself in her high school yearbook. "I do what I please, I do it with ease."