By KURT EICHENWALD
Published: June 05, 2003
Martha Stewart’s lawyer wasted no time yesterday suggesting that his client had become a target for government prosecutors on account of her fame.
“Is it for publicity purposes, because Martha Stewart is a celebrity?” her lawyer, Robert Morvillo, asked in a statement challenging the motives behind her indictment on charges of securities fraud and obstruction of justice.
The lead federal prosecutor in the case, James B. Comey, insisted that the answer to that question was no. “Martha Stewart is being prosecuted not for who she is, but because of what she did,” said Mr. Comey, the United States attorney for the Southern District of New York.
Yet many longtime prosecutors said yesterday that Mr. Comey was being unnecessarily coy. Celebrity, they said, almost certainly played a role in the decision to commit resources to the Stewart investigation, and ultimately try to convince a grand jury to charge her with a crime. And, they added, “So what?”
After all, the purpose of law enforcement is not simply to punish people for crimes they have committed, but to deter crimes that are being contemplated. That pushes prosecutors to send strong signals about the dangers of crossing the line by bringing cases that penetrate the public consciousness. If yesterday’s indictment had been against Martha Jones rather than Martha Stewart, no one would be reading this article — primarily because it would not have been written.
“The deterrent effect is immeasurable,” said Christopher Bebel, a former lawyer with the Securities and Exchange Commission and a former federal prosecutor. ”Even if the government puts a thousand hours into building this case against Martha Stewart, the risk-reward ratio is enormously positive and constitutes a very prudent allocation of government resources.”
Even if the government fails to obtain a conviction, lawyers said, aggressive corporate executives — having seen the price Ms. Stewart paid — will be far more careful about even approaching the line that defines an obstruction of justice. With the prosecution of Ms. Stewart on that charge coming only a year after document shredding helped destroy the Arthur Andersen accounting firm, it would be hard for a corporate executive not to get the message.
The securities fraud count — with Ms. Stewart effectively charged with defrauding the investors in Martha Stewart Living Omnimedia by publicly stating that she put in an order to sell ImClone shares at $60, a claim the indictment says is false — the government has also sent a message about the importance of absolute truthfulness by corporate executives in dealing with their shareholders.
In the wake of the Enron debacle, in which numerous executives have been charged with issuing misleading statements about the company’s prospects, the indictment of Ms. Stewart has signaled an expansion of the need for candor by executives — even in personal financial matters — if investors might care.
None of this means that Martha Stewart was charged because she is a celebrity, the experts said, but rather that celebrity elevated the case higher in the pile of investigations deserving prosecutorial resources. And those resources are evident in the indictment, from the examination of computer files to the analysis of different types of ink in an effort to prove that parts of a document had been fabricated.
No single fact drives the case, legal experts said. Instead, the indictment depends on the weight of the surrounding circumstances.
“There is no blockbuster evidence here,” said Robert Mintz, a former federal prosecutor who is now a partner at McCarter & English in Newark. “What the government has done is weave together a series of omissions and fabrications in order to portray Martha Stewart as somebody who deliberately attempted to thwart the government’s investigation.”
The lack of a single smoking gun gives Ms. Stewart an avenue for a defense — that is, that innocent actions are being misinterpreted because prosecutors want to take down a famous name. ”One strategy that the defense will employ is that she is being singled out solely because of her celebrity status and is being treated unfairly,” Mr. Mintz said.
Indeed, while Ms. Stewart’s celebrity may have played a role in the decision to pursue the case aggressively, it also may have contributed to one of its shortcomings.
Ms. Stewart does not face perjury charges, because at no point was she forced by the S.E.C. to testify under oath about her holdings of ImClone stock. The result is that during her trial, no juror will be able to hear the precise words Ms. Stewart used during her interviews with government investigators. The indictment says that Ms. Stewart was even allowed to speak to the S.E.C. and the Federal Bureau of Investigation simultaneously — by phone.
That, experts said, is treatment that Martha Jones almost certainly never would have received.
“The failure to get testimony under oath compromises the strength of the case,” said Mr. Bebel, adding that he still believed the case against Ms. Stewart was strong. “I think the S.E.C. was pushed around by Martha Stewart’s lawyers.”