Crisis Weighs On Martha Empire

Martha Stewart in crisis omnimedia company Kmart stock
Martha Stewart's felony conviction rattled through her rapidly eroding business empire as shares of her namesake company continued to fall, Viacom canceled her syndicated television show and she quit the board of cosmetic giant Revlon.

But the big question that remained was the future of the home decorating diva's bread-and-butter job as a leader within the company that bears her name.

Martha Stewart Living Omnimedia's board gathered Monday to discuss Stewart's future, according to a source close to the company who spoke on condition of anonymity. Company officials declined to comment; it was unclear late Monday whether the board took any action.

Correspondent Morley Safer reviews past interviews with Martha Stewart, and finds some revealing comments, on 60 Minutes II, Wednesday at 8 p.m. ET/PT.

The Wall Street Journal reported that the board is struggling with how to redefine Stewart's role at the company. The newspaper quotes one unnamed source as saying Stewart is expected to resign from the board.

Stewart stepped down from her roles as chairman and chief executive after being indicted in June but remains as a board member and chief creative officer. With her conviction, the government will likely press to have Stewart removed from the board.

Stewart was convicted Friday, along with stockbroker Peter Bacanovic, of lying about why she sold 3,298 shares of ImClone Systems stock on Dec. 27, 2001, just before it plunged on a negative report from government regulators.

Stewart was convicted of conspiracy, making false statements and obstruction of justice. Bacanovic was convicted of conspiracy, false statements, obstruction and perjury — but cleared of falsifying a document.

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

Stewart briefly addressed a horde of camera crews outside a Manhattan courthouse Monday where she spent about an hour with probation officials who will make a sentencing recommendation.

"I want to thank my readers, my viewers and the Internet users," Stewart said as she stepped into a sport utility vehicle. "I just want to thank everyone for their support."

Shares of Martha Stewart Living Omnimedia 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.

It may prove difficult for MSLO to separate its business from Stewart. Besides the obvious connection through its name, the company features images of the convicted felon on its Web site. On a link labeled "About Martha," there is no mention of her indictment, trial or conviction — instead there is information on her birthday, pets and the fragrance she uses.

Also Monday, Stewart's syndicated television show, "Martha Stewart Living," was taken off the air on Viacom-owned CBS and UPN stations. She also stepped down from the board of cosmetics giant Revlon Inc., Revlon spokeswoman Catherine Fisher confirmed. Stewart had served on Revlon's board since 1996.

The New York Times said Monday that two columns its syndicate distributes would be renamed and written by people other than Stewart, starting immediately.

Despite the avalanche of bad news, experts say Stewart can rehabilitate her image if she is willing to own up to her mistakes.

"She has to show contrition and really apologize to the American public," said public relations man Howard Rubenstein, a spokesman over the years for such scandal-ridden personalities as hotel magnate Leona Helmsley and boxer Mike Tyson.

Those who specialize in shaping the public personalities of their clients say Stewart needs to soften her image, expose her vulnerable side and give the public a reason to cheer the resurgence of a fallen star.

Stewart's immediate options may be limited, given her unyielding insistence that she was innocent.

"Fessing up would be the ideal situation, but she shouldn't do it yet," advises Seth M. Siegel, co-founder of The Beanstalk Group, a brand licensing agency. "If she does it today, it would look fake."

But facing a probable prison term of roughly a year, Stewart has time to ponder how to reshape her future and her image, perhaps with a glance at the failings and triumphs of those who have gone before her.

Helmsley, who served more than a year in prison after her 1989 tax evasion conviction, has largely failed to restore herself to the public's good graces.

Ivan Boesky, the Wall Street star sentenced in 1987 to three years in prison for insider trading, disappeared from public view after losing his suburban New York mansion and Park Avenue penthouse in a messy divorce.

But junk bond king Michael Milken turned his image around. He served two years in prison after pleading guilty in 1990 to securities crimes, was diagnosed with cancer and became a major philanthropist.