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LIVE FROM THE HEADLINES

Split Reaction in Martha Stewart's Home Town to Charges

Aired June 4, 2003 - 19:02   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ANDERSON COOPER, ANCHOR: First, the woman who may have helped decorate your house has pleaded not guilty at a federal courthouse. A grand jury in New York today returned a nine count indictment against Martha Stewart, as well as her former stoke broker. The charges stem from her sale of stock in a drug company the day before the value of the stock drops.
CNN's Jamie Colby has been gauging reaction in Westport, Connecticut, where the home decorator maven lives.

(BEGIN VIDEOTAPE)

JAMIE COLBY, CNN CORRESPONDENT (voice-over): Perfectly manicured lawn, white picket fences and magnificent mansions. Welcome to Westport, Connecticut, where laws are enforced. It's high end and high profile.

NANCY SHERTER, REAL ESTATE BROKER: We have a country ambiance with also cosmopolitan flavor.

COLBY: Many people here live the lifestyle of their neighbor, Martha Stewart.

UNIDENTIFIED FEMALE: I never make a dry chicken now. I slide a slice of lemon under the skin or put an onion in, and that's all Martha.

COLBY: On Oscar's on Main Street, smoked salmon central since 1948, some hardliners, asked about Stewart, said if you play, you should pay.

UNIDENTIFIED MALE: My feeling is she's guilty and she should pay for a crime just like anybody else should pay for a crime.

UNIDENTIFIED FEMALE: I think she knew what she was doing.

COLBY: Fresh from the water aerobics class, these ladies argue the domestic doyenne does not deserve the deep fry.

UNIDENTIFIED FEMALE: You can't compare what she did to what these other people have done. Enron and these other companies have taken away people's life savings, they've taken away their livelihood. There's no comparison.

COLBY: And Oscar's owner Lee Papageorge says Stewart's helped many in Westport find a livelihood. LEE PAPAGEORGE, OSCAR'S: She's created a lot of jobs in this area. She's opened up three studios. Over the years when she started off, she did have a lot of catering, a lot of weddings. She employed a lot of people.

COLBY: And helped sell a lot of homes. Since Stewart arrived in Westport, real estate broker Nancy Sherter says property values have surged.

SHERTER: It keeps going up, mainly, I guess, because Martha was there.

COLBY: And Sherter doesn't think Stewart's legal woes will cause that to change.

Westport, Connecticut, will remain quintessential Martha and her products, these locals predict, will continue among consumers to be top sellers.

UNIDENTIFIED MALE: She's interesting, she's a great entrepreneur. She's the American dream.

UNIDENTIFIED FEMALE: She's got great products, she's got great ideas. There'll be a small number of people that probably won't, but I would still buy her products.

(END VIDEOTAPE)

COLBY: And though Martha Stewart was front page news across the country, it's unlikely that the support for her here, Anderson, will wane even though she's been indicted.

Take, for example, the local paper. There is a story on the front page, cheating concerns investigated. But it's not about Martha Stewart. Two high school students cheated on their A.P. exams -- Anderson.

COOPER: All right. Jamie Colby, thanks very much.

Our legal analyst, Jeffrey Toobin, talked with Martha Stewart about this mess earlier this year in a rare interview at her Connecticut home. A short while ago, I spoke with Jeff about today's indictments.

(BEGIN VIDEOTAPE)

COOPER: Nine-count criminal indictment: What are the charges and how serious are they?

JEFFREY TOOBIN, CNN LEGAL ANALYST: There are four charges against Martha Stewart. Three of them relate to obstruction of justice, to interfering with the investigation, either by lying in the interviews or by trying to alter a document, a telephone message which she is said to have tried to alter.

The last charge, a very unusual charge, is conspiracy to violate the security laws by essentially saying that she's not guilty. The charges...

COOPER: Who did she say it to, though?

TOOBIN: She said it to the public. It's essentially lying to the public in an effort to keep the stock of her company artificially high. I've never seen a charge like that before. I think that's unquestionable legal ground.

COOPER: What I don't get, though, is I mean, all the talk was of insider trading and then you don't see that listed as one of the charges.

TOOBIN: No, you don't. And that is something her defense lawyers can really work with. They can say, well, why is she charged with lying when she had nothing to lie about? She wasn't charged with insider trading.

It's a difficult crime to charge in the best of circumstances, and here where all she was told apparently was that the Waksals, the people who worked at the company were selling, that mere fact of knowing that the insiders were selling does not necessarily make it insider trading on her part.

COOPER: What happens now?

TOOBIN: She was arraigned today and the judge will hear motion practice, will hear, you know, motions dismiss the case, motions about evidence. But then there'll be a trial, probably in a few months, here in Manhattan.

COOPER: And if she is convicted on, say, all the charges, what kind of -- I mean, she's facing jail time.

TOOBIN: Absolutely. I mean, you know, if you add up the prison sentences, it's 20 years. She's not going to get 20 years. But given the environment today and given the Justice Department policies on white collar crime now, certainly, if she's convicted on all these charges, she is definitely looking at jail time.

COOPER: And then there are civil charges from the SEC.

TOOBIN: Right. That is insider trading. Again a peculiarity of this case, that apparently the government thought it was enough to bring a civil insider trading case where the standard is only more probable than not, but they couldn't prove it beyond a reasonable doubt, which is the criminal case. That's unusual that they don't line up.

COOPER: You mentioned that the defense strategy would be to point out the fact that there is no insider trading charge on the criminal complaint, so you ask the jury, why would she lie? What would the prosecution's strategy be? I mean, can they bring up the idea of insider trading, or if that's not a charge, can they not mention it?

TOOBIN: They can certainly mention it and they can say, "Look, everybody was worried about being charged. She was clearly worried about being charged with insider trading." And they'll just say, "Look, lying is lying. It doesn't matter what your motive is. If you lie to the government, if you alter documents, you know, tamper with evidence, that's criminal."

That's their case.

COOPER: Jeffrey Toobin, thanks.

TOOBIN: Sure.

(END VIDEOTAPE)

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