Stewart, Broker Each Get Five Months in Prison

Updated from 4:03 p.m. EDT

Martha Stewart, the 62-year-old former fashion model whose opinions on decor transformed the modern American home, was sentenced to five months in prison, five more months of home detention and two years of probation by a federal judge Friday. Shares of the company she founded surged after the punishment was read.

Stewart's stockbroker, Peter Bacanovic, received the same sentence at an afternoon hearing. Stewart was fined $30,000; Bacanovic, $4,000.

Earlier in the day, Judge Miriam Goldman Cedarbaum announced Stewart's ruling to a packed courtroom in New York, where Stewart made a brief, emotional presentencing statement.

Prior to Cedarbaum's ruling, Stewart said it was a "shameful day" for her, adding that during her legal journey "the personal attacks spread like oil over a vast landscape" and she had "felt suffocated to death." Nevertheless, Stewart still sought "an opportunity to repair the damage."

Stewart's lead attorney, Robert Morvillo, also spoke before the sentence was handed down, asking the judge for probation for his client, saying she is "warm, gracious, caring and attentive to the needs of others." He also said Stewart's company "remains a grave concern" and that "hundreds, perhaps thousands, of innocent people will suffer" if Stewart is sent to prison.

Stewart was convicted March 5 of lying to the government about her well-timed sale of about 4,000 shares of ImClone Systems ( IMCL) in December 2001. The founder of Martha Stewart Living ( MSO) was convicted on all four counts in the obstruction of justice case.

U.S. prosecutors had asked the judge to impose the strictest sentence possible. Lawyers had predicted that Stewart most likely would receive a term of about a year and serve her time in a low-security facility, where she will be allowed to read, watch television and work in the prison kitchen.

The judge made no comments about Stewart's personal character.

Ever since Stewart's lawyers lost the case in March, they have been intent on trying to get their client a new trial, but both motions failed.

Stewart's attorneys, in a news conference after the hearing, said they would press forward with her appeal, saying there were "five issues" in the case.

In April, Stewart's legal team, led by high-profile defense attorney Morvillo, motioned for a new trial based upon the false statements of juror Chappell Hartridge during jury qualification. In June, Stewart's lawyers pitched for a new trial on the grounds that a U.S. Secret Service laboratory director, Larry Stewart (no relation), lied while testifying as an expert witness during the trial.

Unfortunately for Stewart, both of these long shots failed to score with Judge Cedarbaum, who rejected them on the grounds that they ultimately would have failed to change the jury's guilty decision.

Stewart also addressed supporters and the news media after leaving the court, striking both a different pose and tone. She appeared somewhat angry, but determined, saying she is "not afraid." She called her experience "an almost fatal circus of epic proportions." She also thanked her supporters, while making a pitch for new magazine subscribers and advertisers.

In something of a surprise, however, the judge also stayed Stewart's sentence, meaning that she can remain free on bail while her legal appeal goes forward, a period legal experts say can range from six months to two years.

Stewart's appeal will be handled jointly by her current legal team headed by Morvillo, as well as Walter Dellinger, a partner at the law firm O'Melveny & Meyers. Dellinger is also a professor at Duke University's law school and once represented Bill Clinton in front of the Supreme Court.

In discussing the appeal, Dellinger also raised the issue of the high court's recent decision in the Blakely vs. Washington case, which has thrown sentencing guidelines into a state of chaos.

In a 5-4 decision, the court ruled that Washington state's sentencing guidelines unfairly deprived defendants of their right to a jury trial, because judges could consider facts that were not part of the charges presented in court or admitted to by defendants when determining sentences.

In the aftermath of that ruling, hundreds of defense attorneys have assailed the guidelines in an attempt to get sentences tossed out. Three federal courts have declared the guidelines unconstitutional.

Morvillo launched a pre-emptive attack on July 8 when he submitted an affidavit declaring the guidelines "unconstitutional and therefore inapplicable in this case."

In her ruling, the judge recommended that Stewart serve her time at the minimum-security Danbury Federal Correctional Institution (nicknamed "Club Fed"), located in her home state of Connecticut. Stewart indicated she would spend her home confinement period at her Bedford, N.Y., residence.

The Federal Bureau of Prisons will make the final determination after undertaking the standard analysis of personal background, criminal history and site availability.

Usually when a criminal is sentenced, he or she gets about 90 days to wind up his or her affairs before reporting to prison. But that won't happen in Stewart's case.

Speculation about her life in prison and its effect on her company is also moot for now.

Legal experts were mixed on the severity of Stewart's sentence. Defense attorney Charna Sherman said she did not believe the sentence was light at all.

"Martha Stewart was prosecuted for who she was so that the rest of us would learn that lying to investigators is a crime," said Sherman. "But because of her stature, she also suffered enormous costs that exceed, by an incredible margin, any penalty ever envisioned by any lawmaker and certainly those actually enacted into law."

Well-known Wall Street attorney Jacob Zamansky, however, saw Cedarbaum's ruling as "very lenient, but ultimately fair." Zamansky predicts Stewart's appeal will fail and the diva will indeed see the inside of a prison.

The company had anticipated and prepared for the worst-case scenario by marginalizing Stewart's presence on both the flagship magazine and new-product launches.

Indeed, MSO shares rallied in very heavy trading after the ruling, adding to pre-sentencing gains. Recently, shares were up $3.22, or 37%, to $11.86. It traded as high as $12.12 earlier in the session. Volume was 15.1 million shares, about 45 times the average daily volume of 293,500.

Stewart's co-defendant and former Merrill Lynch broker, Bacanovic, did not appear at her sentencing but his lawyers did, only to return later in the day.

At the afternoon hearing, Cedarbaum gave Bacanovic 10 days to file an appeal, which his lawyers plan to do. They also said the choice of prisons was a minimum security camp in Otisville, N.Y.

Judge Cedarbaum said she gave Bacanovic the minimum sentence for four reasons: he had no prior record, family and public letters of support, the achievement of the public interest objective, and because he has "suffered and will suffer enough."

Bacanovic, for his part, expressed remorse when he appeared in court. "I deeply regret the pain and (feel) sorry for family and friends."

"The pair received the same punishment because they were equal participants in the conspiracy," said Arthur Jakoby, a former US prosecutor.

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