Jump to content

This Sunday

Recommended Posts

I am sure you have all been waiting for this. :big:

After five months in federal prison, Martha Stewart is scheduled to go home Sunday. :big:

What's next for Martha Stewart?

By Rick VanderKnyff

The ‘MacGyver of domesticity’ gets out of the big house next week. Awaiting the home-décor entrepreneur: house arrest, reality TV and a wobbly company with a soaring stock.

After five months in federal prison, Martha Stewart is scheduled to go home Sunday.

She still has five months of house arrest to contend with, but don't picture Stewart sitting at home and knitting doilies, waiting for the day she can once again roam free. She has plenty on her designer plate to keep her busy, both potentially good (a stab at reality TV stardom) and potentially bad (a still-looming insider trading charge from the Securities and Exchange Commission).

To recap, Stewart entered federal prison in Alderson, W. Va., in October after her conviction in July on four felony counts of lying to federal investigators looking into her suspiciously timed sale of ImClone Systems (IMCL, news, msgs) stock. (She was never charged in the criminal case with insider trading, though that was the impetus for the original investigation).

Stewart was free pending the outcome of an appeal, but in September she elected to serve her time -- at least in part to help her battered media company, Martha Stewart Living Omnimedia (MSO, news, msgs), move past the uncertainty and controversy brought by the criminal case.

So Stewart has paid her $30,000 fine and is just about to complete her prison sentence (while the official release date is Sunday, she could be let out as early as Friday). Among the things she has done while behind bars, according to a December message from Martha Stewart herself and the newest issue of Martha Stewart Living: lots of cleaning, teaching yoga to fellow prisoners, "foraging for wild greens" and making a nativity scene for her mother.

And somehow, despite that pesky incarceration, she also managed to stay in the news and go a long way toward rehabilitating her image.

The next Trump? Maybe, and with better hair

Her TV plans have been the real newsmaker for Stewart. She will hook up with Mark Burnett, the man who invented the reality TV genre with "Survivor" and went on to resuscitate Donald Trump's celebrity CEO status in "The Apprentice."

First to be formally announced was a Burnett-produced, domestically themed daytime show, similar to her old "Martha Stewart Living" program (put on hiatus last summer) but with a live audience and celebrity guests. It will debut in fall.

Then, in early February, came the announcement of "The Apprentice: Martha Stewart," a prime-time spin-off of the Trump hit "centered around Stewart's areas of expertise: media, home renovation, entertaining, design, merchandising, technology and style," according to a press statement.

Representatives of NBC and Martha Stewart Living, along with Burnett and Trump himself, have lauded the deal (apparently reached before Stewart entered prison) as a perfect match.

More on Martha

Some observers aren't so sure that doing a stint on reality TV is the best thing for the long-term health of Stewart's brand value. "She's become more of a '15-minutes-of-fame' thing than 'Martha makes the best towels' or 'Martha makes the best sheets,'" said Mike Paul, who heads a crisis P.R. and reputation management firm in New York. "I'm not necessarily sure that's going to help the company."

"I don't think she could have picked a worse approach," echoed Paul Argenti, a professor of management and corporate communication at Dartmouth College who has consulted for Stewart in the past. "There will be a novelty, but that's going to wear off. It's just not going to endear her to people for very long."

Just what does house arrest mean, anyway?

Whether or not Stewart benefits from it in the long run, the "Apprentice" deal does raise logistical questions. Namely, exactly how does one go about taping a TV show while under house arrest?

Auditions for the show have been taking place in 27 cities this month, and potential contestants have been told that, if chosen, they will need to be available for up to eight weeks in spring or summer (Stewart's house arrest is scheduled to end in August). Burnett has been quoted as saying he plans to tape during the house arrest.

Details of how that will work will have to be ironed out between Stewart's assigned federal probation officer and her legal team. Normally, someone under house arrest can spend up to 48 hours a week away from the house for work purposes and has to spend at least one full day per week at home. While NBC won't comment on where the show will be taped, The Wall Street Journal reported this week that Stewart's segments could be taped at her residence.

"The big thing is that she can work, but she's going to need permission to do this TV show," said Larry Soderquist, director of Vanderbilt University's Corporate and Securities Law Institute. He expects that permission to be granted.

Typically, people are placed under house arrest to relieve a strain on the prison system while providing some safeguards against flight or recidivism. Some of the consequences of Stewart's current legal status:

She can't vote (though in New York or Connecticut she can re-register at the end of her two-year probation).

She can't carry a weapon.

She can't associate with other convicted felons (Michael Milken's off the guest list).

She'll also have to report her activities to a probation officer and probably wear an electronic tracing device on her ankle that communicates with a base station in her house -- though such devices aren't usually designed with the range to cover a 153-acre estate.

What about her company?

One thing she won't be doing -- at least directly -- is running the company she founded.

Stewart gave up her role as CEO and as director in the wake of her legal troubles (current CEO Susan Lyne was brought aboard in November after predecessor Sharon Patrick was ousted). Stewart remains on the payroll, however, with the title "founder and chief editorial director and media director." The deal pays her a salary of $900,000 a year, plus possible bonuses, according to The Wall Street Journal; though she was not paid while in prison, she will be paid during her house arrest.

The company continues to struggle with reduced revenue from TV and publishing ventures. The stock, however, keeps climbing on optimism over Stewart's comeback -- rising from less than $11 per share last July, in the wake of her conviction, to more than $36 as of Friday's market close.

As the owner of more than 30 million MSO shares, Stewart has benefited handsomely from the image rebound. She sold about $8 million in stock in December.

Her legal travails continue

But will she ever be allowed to run the company again? A lot of that is up to the Securities and Exchange Commission. The SEC filed a complaint against Stewart and her stockbroker in 2003. A civil trial is possible, though the SEC settles some 90% of its cases and typically is content to sit tight until criminal cases are resolved.

Some observers believe the SEC won't settle unless Stewart agrees to what is called an officer and director bar -- meaning she can never again serve as CEO or director of any publicly held company, including her own.

Ross Albert, a former SEC attorney now in private practice with Morris, Manning & Martin in Atlanta, believes that if the SEC were willing to settle for anything less than an officer and director bar, "it would have happened by now."

Added Soderquist: "There's a lot of public sentiment that she has suffered enough. It's difficult to call what the SEC would do. They don't want to be seen as piling on to someone who is widely seen as having suffered enough. Neither would they want to be seen as treating a celebrity too lightly."

One potential compromise, Albert said, would be a time-limited bar that would let her return as CEO in five to 10 years -- and in fact, some news organizations are reporting that just such a deal is in the works.

Stewart also has a pending appeal of her criminal conviction, and she faces a civil lawsuit from shareholders. Why go through the turmoil of an appeal if she has already paid the fine and served the sentence?

"Vindication," Soderquist said. "Of course, that whole process is impossible to predict. . . . I certainly feel that her chances of winning on appeal are not great."

The 'MacGyver of design'?

So while the road ahead still has its uncertainties, and some are skeptical about the staying power of Stewart's comeback, public sentiment (as measured by consumer rankings) has swung solidly behind her. Investors are cheered by her image makeover so far -- despite a felony conviction, a jail stint and a notable lack of contrition.

All in all, a pretty neat trick, according to Cheryl Stumbo, a Seattle-based brand development expert -- who admits she's not a particular fan of Stewart's. "This whole thing just shows her fierce determination and her talent to make the best of what's available," Stumbo said.

"She's the 'MacGyver' of domesticity. That's what she does. She makes lemonade out of lemons."


Link to comment
Share on other sites


This topic is now archived and is closed to further replies.

  • Create New...