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Stewart reports to court

She meets with federal probation officials as the board of her company gathers to discuss life without their founder.

By Wire services
Published March 9, 2004

NEW YORK - Carrying an umbrella emblazoned with the logo of the company she founded, Martha Stewart returned to federal court in Manhattan on Monday and met for about an hour with federal probation officials who will recommend the length of her prison sentence for lying about a stock sale. She then emerged from the courthouse to thank her supporters.

Stock in Stewart's namesake empire slid 8 percent more, and the board of Martha Stewart Living Omnimedia gathered to discuss life without the domestic entrepreneur.

Late Monday, the CNN news network reported that Stewart would leave the board of her company, citing people it did not identify. CNN also said the board was considering changing the company's name.

Stewart did step down from the board of cosmetics giant Revlon Inc. on Monday, Revlon spokeswoman Catherine Fisher confirmed. She would not comment further. Stewart joined Revlon's board in 1996.

And Stewart's syndicated television show, Martha Stewart Living, was taken off the air on Viacom's CBS and UPN stations.

The probation meeting was the first step toward sentencing. While lawyers did not comment on what took place, newly convicted defendants typically give basic information about themselves.

Stewart was convicted Friday of conspiracy, making false statements and obstruction of justice in connection with her sale of nearly 4,000 shares of ImClone Systems stock shortly before the biotechnology company announced bad news and the shares plummeted. Her former stockbroker, Peter Bacanovic, also was convicted of lying to investigators and obstruction of justice.

Both are expected to get 10 to 16 months in prison when they are sentenced June 17.

As Stewart left the courthouse and stepped into a waiting vehicle, she told reporters, "I want to thank my readers, my viewers and the Internet users. I just want to thank everyone for their support."

The remarks were her second since being convicted. As Stewart left the courthouse Friday after the verdict, the New York Daily News asked her to comment on the fairness of the trial. "The unfairness of the trial, that's the right comment," she replied.

Bacanovic also met briefly with probation officials Monday at the courthouse. He did not address reporters as he entered or left.

Stewart stepped down as chief executive and chairman of her company's board last June after being indicted but remains as chief creative officer and a member of the board.

With her conviction, the government will likely press to have Stewart removed from the board, but the big question is how involved in the company she will be. Her name, now tainted by the conviction, is stamped on TV shows, magazines and merchandise.

There was no immediate word about her TV show's future from King World, the show's syndicator, but the Viacom-owned stations in major media markets were considered its most important customers, said Bill Carroll, an expert on syndication for Katz Television. A spokesman for King World, Arthur Sandow, did not immediately return a call for comment.

Who's positioned to claim Stewart's crown? Carroll said there's been industry speculation that Oprah Winfrey's production company is considering a spinoff makeover show, much like it launched the popular Dr. Phil talk show.

Winfrey has been doing a handful of makeover segments on her show each month in which it seems as if she's been auditioning concepts and personalities, he said. "That would be the next-generation Martha Stewart," he said.

Shares of Stewart's namesake company, Martha Stewart Living Omnimedia Inc., fell 96 cents to close at $9.90 Monday on the New York Stock Exchange adding to a nearly 23 percent tumble on Friday after the verdicts.

The stock had traded at about $19 a share before Stewart's name surfaced in the ImClone investigation. Stewart owns about 30-million shares of the company, or about 61 percent, meaning she has lost millions as the stock has fallen.

Dennis McAlpine, a managing director, of the research firm McAlpine Associates, said Martha Stewart Living has a number of options as the company digests the verdict, from Stewart taking the company private to a name change.

Stewart, 62, and Bacanovic, 41, were found guilty of lying to investigators about why Stewart sold 3,928 shares of ImClone Systems stock on Dec. 27, 2001. The day after Stewart sold, the government announced it would not review ImClone's application for approval of a cancer drug, Erbitux.

[Last modified March 9, 2004, 01:35:32]

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