Return to Transcripts main page

CNN Larry King Live

Analysis of Martha Stewart Trial Verdict

Aired March 05, 2004 - 21:00   ET

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

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


NANCY GRACE, GUEST HOST: Tonight: a stunning courtroom verdict, Martha Stewart found guilty on all counts. She could face up to 20 years behind bars. We go live for eyewitness accounts inside that federal courtroom. Tonight, Martha's close friend, Dominick Dunne, the host of Court TV's "Power, Privilege and Justice"; Henry Blodget, in the courtroom from the beginning of the Martha Stewart trial for "Slate" magazine; also with us, Susan McDougal -- Susan McDougal spent nearly two years behind federal bars in the Whitewater case -- plus defense attorney Chris Pixley; former federal prosecutor Michael Zeldin all next on LARRY KING LIVE.
Welcome to LARRY KING LIVE. I'm Nancy Grace from Court TV, in for Larry tonight. Thank you for being with us.

A courtroom stunner today, Martha Stewart convicted on all counts, sentencing set down for June 12.

With me here in the studio, Mr. Blodget, you were there throughout the trial. What went down when the verdict was read? Who read it, and what was the reaction?

HENRY BLODGET, FORMER SECURITIES ANALYST, IN COURT ENTIRE TRIAL: The judge read it. Certainly, there was a lot of shock. I think when we saw the jury file in, we didn't see them smile at Martha. That was a bad sign. But still, one after the other, four counts in a row of guilty, very shocking, and certainly, to me, anyway, a surprise.

GRACE: Dominick, you are a friend of Martha Stewart's. You have been there in the courtroom from the beginning. You're writing an article, "Going After Martha," that's going to appear in "Vanity Fair." What was her reaction when the verdict was read? I've heard many different conflicting accounts.

DOMINICK DUNNE, FRIEND OF STEWART, IN COURTROOM TODAY: Well, I think Henry and I agreed totally. There was no reaction from her. She was looking straight ahead. Her expression did not change.

GRACE: You know, I even noticed, as she was coming out of the courthouse and walking down the steps of the federal court building, she looked over at some supporters and actually managed to smile.

(CROSSTALK)

GRACE: This has been her expression throughout -- stoic, composed. Even when the jury filed in, Dominick, I understand none of them could look at her. DUNNE: None of them...

GRACE: Is that true?

DUNNE: You can always tell...

GRACE: Oh, yes.

DUNNE: You can always when the jury comes in. You know, if they -- if they look toward the defense table, you know -- and not one of them looked in that direction.

GRACE: Michael Zeldin, former federal prosecutor, are you surprised at the jury's verdict and their relatively short degree of deliberations? This was day three.

MICHAEL ZELDIN, FORMER FEDERAL PROSECUTOR: No, I think it was pretty straightforward case after the one count was thrown out, which was, Did you believe the government witnesses? And if you did, what was the response from the defense? And there was no response from the defense. And so, clearly, the jury credited the testimony of the government witnesses, and that was the end of the case. There was not much to deliberate.

GRACE: You know, Michael, I was very surprised they did not call Martha Stewart to the stand. Many court watchers speculated that Stewart was probably smarter than all the lawyers put together and could hold up very well on cross-examination. They chose for her to enact her right to remain silent. Mistake?

ZELDIN: Well, after the fact of a guilty verdict, of course it's a mistake. But it's hard to know without having been there to know whether or not she was a credible witness or not. She had a story to tell. She told it on LARRY KING LIVE and elsewhere in the public domain. She protested her innocence. And then when she had her day in court, she remained silent. I think jurors probably had a problem with that. But clearly, Morvillo, who's a terrific lawyer, knew better his client and how well she would fare under cross-examination from very good prosecutors.

GRACE: Chris Pixley, what are we looking at now? What's the minimum, the maximum and the most likely sentence for Martha Stewart?

CHRIS PIXLEY, DEFENSE ATTORNEY: Well, if the judge stays with the base offense level, Nancy, the likely sentence is going to be 15 to 21 months. Now, the maximum is up to five years. I don't expect any downward or upward departures in this case, and we're dealing with federal sentencing guidelines. So in the federal domain, the judge has to work within certain confines. In this case, I think that Martha Stewart will get the lower end of the possible range, but you're still looking at between 15 and 21 months, at least 15 months in a minimum-security penitentiary. So it's a serious sentence.

GRACE: Speaking of a minimum-security federal penitentiary, let's go to Susan McDougal. Susan is now the author of "The Woman Who Wouldn't Talk: Why I Refused to Testify Against the Clintons and What I Learned in Jail." Susan McDougal, who was represented by Mark Geragos in her case, served time behind federal bars, about 18 months, as I recall, on a contempt charge.

What's your advice for Martha Stewart tonight?

SUSAN MCDOUGAL, SERVED 22 MONTHS ON WHITEWATER CHARGE: Gosh. The advice I would give her is to go into it with an attitude of humility. I know that she's scared and I know she's worried about it. I know she's angry because I was so angry, there were nights when I first went in that I used to dream of torturing Kenneth Starr. I mean, I would dream all sorts of tortures for him, and it would -- it was the only thing that got me through.

But you know, the thing I learned more than anything else is that there are scores and scores of women in there, all of them with a story. And she can spend that time in humility and come out a better person. I think I did. I think I'm a much better person for having gone in there and met the women that I met. And I'm going to give her the advice of being just like everybody else in there.

Of course, there's not much choice because you're issued your clothing on the very first day, and your number, and that's how you're referred to by staff and by the other people there. But I think, also, the women will be waiting for her. They're watching this case very closely. They'll know that she'll be coming to their place. And when she gets there, there will be people waiting to help her and there will be people waiting to give her a very hard time.

GRACE: You know, Henry Blodget, I think the money was on Martha, if anybody was of the betting frame of mind. If you take a look at the stock market this past week, her stock was trading up all the way leading up to this verdict. Of course, today, when the guilty verdict was announced, trading for Martha Stewart Omnimedia halted. It picked up later, but by the end of the day, it had dropped 20 percent in one day. But the money was on Martha Stewart to beat this thing all week, as we led up to the verdict. What went wrong?

BLODGET: Well, I think that's right. The stock actually, when there was the rumor that the verdict had been announced, the stock actually rose this afternoon. And then when it came out, as you said, it plummeted. I think that people who really had been listening to the evidence and had been watching a lot of the commentary believed there was a very good chance the jury would have a tough time convicting Martha Stewart. And I certainly really thought so, and I thought that you could get to reasonable doubt on each count if you really analyzed it. The jury disagreed. It was big surprise.

GRACE: Dominick Dunne, do you think that Martha Stewart was portrayed in front of this jury as a mean-spirited person? You had Faneuil take the stand -- Douglas Faneuil is the state's chief witness in this case, and he portrayed Martha very badly, for instance, complaining about the Musak on the phone when she was on hold, describing her voice as a lion roaring under water, making her appear as if she mistreated her underlings. Was this some kind of a popularity contest? I thought this was a felony trial.

DUNNE: Well, you know, I think...

GRACE: Nobody ever said Martha was nice, OK?

DUNNE: You know, she is nice, though. I happen to know her and like her, and she is nice. I think she does have that other side to her, where she is -- she does talk bad to people, you know?

GRACE: Well, don't we all...

DUNNE: And don't we all?

GRACE: ... have a bad side? I'm just shocked that...

DUNNE: And I think that keeps coming out because she's a woman. I mean, you know, Jack Welch, one of the great CEOs of all time, yelled at people. I mean, and -- but you never heard that about him. So I mean, they kept -- they kept -- and as for the Musak thing, I'm going to leave Merrill Lynch because -- I mean, you know, that -- knowing her as I do, she could have said that as a joke.

BLODGET: A joke. Clearly.

DUNNE: As a joke.

BLODGET: It was very funny. It was A funny line in the...

DUNNE: I mean, it was a funny line...

(CROSSTALK)

DUNNE: This wasn't -- you know, and it was presented as a kind of bitchy line.

GRACE: Well, long story short, to you, Michael Zeldin, did this turn into a issue of who went home Miss Congeniality and it ended up costing Martha Stewart time behind federal bars?

ZELDIN: Well, no, I don't think this was a Miss Congeniality contest. I think that you always learn, as a defense lawyer, that you've got to make your client liked by the jury. You have to be liked by the jury, and you have to believe -- the jury has to believe that you're telling the truth in what you say. And clearly, she failed on one or two of those scores. They didn't like her. And they didn't feel she was telling the truth.

Now, she told the truth, if you will, through the cross- examination of government witnesses, and as I said, not through her own mouth. But she wasn't presented as a likable person by her own staff. And when she didn't come back in her own defense to say, you know, I'm not that way, this was a joke, and this is what I was doing and this is who I am, they have no choice but to view her in her public persona.

GRACE: That's right, since her defense...

ZELDIN: And she lost for that. GRACE: ... decided not to put her on the stand. You know, Larry King talked to Martha Stewart just before Christmas, her last interview before her trial started.

ZELDIN: Right. I saw that.

GRACE: Because that trial was still pending at the time, she couldn't discuss the facts of the case or the specifics of the legalities. And she spoke for herself, not for Martha Stewart Living Omnimedia. Here's some of that.

(BEGIN VIDEO CLIP - DECEMBER 22, 2003)

LARRY KING, HOST: Is all of this very shocking to you?

MARTHA STEWART: No one is ever prepared for such a thing.

KING: I wouldn't imagine.

STEWART: No one. And no one is ever strong enough for such a thing. No one is -- you know, you don't -- you have no idea how much worry and sadness and grief it causes.

KING: And I would imagine, especially if someone thinks, I didn't do anything wrong.

STEWART: Exactly.

KING: So that's got to drive you berserk.

STEWART: Well, but that -- having done nothing wrong allows you to sleep, allows you...

GRACE: It does?

STEWART: ... allows you to continue your work, gives you -- gives you the opportunity to think about other things. But there's always the worry. I mean, a trial's coming up.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

DAVID KELLEY, U.S. ATTORNEY: If you are John Q. Citizen or Martha Stewart or Peter Bacanovic, we're going to go after you if you make these types of lies. We do cases each and every day. We do large ones, we do small ones and we do cases that draw some attention but some cases that don't draw all this attention. Nonetheless, all those cases are equally important.

(END VIDEO CLIP)

GRACE: A stunning courtroom verdict today, Martha Stewart found guilty on all counts lodged against her, her co-defendant, Peter Bacanovic, found guilty of four out of five counts. Each one of these counts carries a sentence of five years behind bars. Sentencing now set down for June 12.

Welcome back to LARRY KING LIVE. I'm Nancy Grace, in for Larry tonight. And I want to thank you for being with us.

Let me go to you, Henry Blodget. What I want to find out is the atmosphere in that courtroom. We could see a little bit, but we weren't there. Was it the home team or was it an away game for Martha Stewart? Were people on her side in the courtroom?

BLODGET: I think a lot of people were very much on her side. There's a lot of sympathy. Obviously, her PR campaign over the last six months has really paid off, in terms of, I think, building a lot of public sympathy. But really, after lunch, we all come back, we expected the jury to deliberate all day. Suddenly, there was a buzz that the verdict came in. The tension just began to build. And again, when the verdict was delivered, it was very shocking.

GRACE: Well, Chris Pixley, I felt the buzz on Thursday because you and I know from trying cases, you're looking at Friday afternoon, the jury knows they've got to come back on Monday. Forget about it! Were you surprised, or was it that you expected a Friday afternoon verdict, Chris?

PIXLEY: I expected the verdict to come in, actually, this week, Nancy, for some of the reasons that you're mentioning, but most importantly, a reason mentioned earlier tonight, and that's the fact that these charges were fairly simple.

You know, the -- really, the travesty here is that the government didn't prove that Martha Stewart committed any crime. What they proved is during the course of their investigation that she lied to them. And that was a fairly simple showing. They were able to bring in witnesses who simply contradicted Martha Stewart's statements or the statements of her own attorneys in the process, and of Peter Bacanovic. And Martha Stewart didn't take the stand to refute any of those contradictions. So it came down to being a fairly simple question.

The real problem is the obstruction of justice charges are just a trap for the unwary. We put defendants in this terrible position of being on the receiving end of a criminal investigation, and then we expect them to act perfectly. And even if the government can't prove the charges against them, if they can prove that they lied, they go to jail.

GRACE: Michael Zeldin, I know one thing, after seeing this verdict today, I'm going to redo my federal taxes and check out a few of those deductions I claimed because if you look at 20 years in the pen for lying -- you know, I would guarantee you 80 percent of people's federal tax returns have a lie on there somewhere. But why Martha Stewart? Michael Zeldin, you know as well as I do that insider trading is endemic within the system. My cousin's brother told me this. My baby-sitter's dad said this. Why Martha Stewart on trial, Michael? ZELDIN: Because she lied to the government, and the government doesn't like to be lied to. I mean, it's not really that Martha Stewart, I think, was picked on. In fact, in some respect, I think you could argue that Martha Stewart was given a break by not being charged with insider trading because, clearly, the evidence supports the proposition that she received a piece of insider information and acted upon it. That's classic insider trading. But the government, in some respects...

GRACE: But you think that was giving her a break, or the feds felt they couldn't prove it?

ZELDIN: Well, you can argue it either way. They proved what they needed to prove pretty simply and pretty quickly. So I'm not sure that I buy into the notion Martha Stewart was victimized because she was wealthy and powerful or because she was mean or anything of that sort. I think that, basically, it came down to the government asked her what happened, she made up a story that they didn't believe, she showed no contrition in the process. I expect that there were plea offers made to her over the course of this that involved her acknowledgement of responsibility, which she rejected. And they were left with nothing but a trial.

I just -- my experience as a federal prosecutor tells me that when the government comes to you and says, Look, if you play ball with us, if you acknowledge wrongdoing, we are willing to work with you -- I think that's true in most cases, and there was nothing here to work with. And she got the consequences of that failure to cooperate.

GRACE: Yes, Dominick...

MCDOUGAL: God forbid you should be innocent and not want to cooperate.

(CROSSTALK)

MCDOUGAL: I absolutely agree with him. They will come to you and they'll say, You're guilty, and will you cooperate with us, and we'll give you a great deal. And God help you if you're innocent. God help you if you don't believe that you're guilty...

GRACE: Hey, Susan...

MCDOUGAL: ... and you want to fight the charges.

ZELDIN: Well, but Susan -- Susan, you...

GRACE: Susan McDougal, question...

ZELDIN: ... went to trial and were found not guilty. I mean, you -- you did -- you did exactly that. You went to trial and were found not guilty and -- and...

MCDOUGAL: But in my first trial, I didn't testify. I was just like Martha. I thought, You know, I'm not guilty of this. They're going to see it. I had eight women and four men, and you know what happened? The women hated me. They came in with a guilty verdict, laughing. They were laughing when they came into the jury box.

GRACE: Susan McDougal...

(CROSSTALK)

GRACE: ... ask you a question before we go to break...

MCDOUGAL: ... bad character evidence.

GRACE: Susan, we've all seen "Martha Stewart Living" on television. Whether we've attempted her projects or not, we've seen it. We've seen Turkey Hill. We've seen the beautiful surroundings she has created for herself. What is one day like in the women's federal penitentiary? What is a day in the life for Martha Stewart?

MCDOUGAL: Well, every visitor she has, if it is her daughter, her minister, every single visitor, she will be taken to a secluded area and strip-searched. She will be asked to bend over and to show her vaginal area, her anal area. It depends on the guard how very rough that search gets or how nice it can be. And some of the guards are very cruel. And I think that was one of the most shocking things. I used to say, Look, I've had three visits. I don't need any more today. That is a very cruel thing for a woman to go through.

When you get to visiting, for instance, they won't let you leave any time you want. For women, there aren't enough guards, and so you might need to go to the bathroom. Say that you are having your period. You might sit there and have blood all over the seat, all over your clothes, and no one to take you back to your cell. It is a very humiliating, daily humiliation that you're not used to.

I saw a 70-year-old lovely woman, hair up in a silver bun, from Florida, who had been convicted with her husband on some charge -- I've forgotten what it was -- beaten with a phone because she had dared to speak, you know, unkindly to someone who had gotten in front of her in a line, beaten unconscious in a secluded area of a federal prison. And I really think -- more than anything, I want to say don't think that Martha Stewart's going to learn tennis because every room you walk into in a federal institution is a fearful place. You don't know who's there...

GRACE: Susan McDougal, we have got...

MCDOUGAL: ... and what's happening.

GRACE: ... to go to break.

We are discussing the Martha Stewart verdict -- as you know by now, Martha Stewart found guilty on all counts. Was she a trophy defendant for a couple of federal prosecutors, or did the state show that no one, no matter how great, is subject to the laws of this land? Take a listen to her defense attorney, Robert Morvillo.

(BEGIN VIDEO CLIP)

ROBERT MORVILLO, ATTORNEY FOR MARTHA STEWART: We are disappointed at the outcome. We look at this as having lost the first round. We look at this as an opportunity for us to go to the next rounds and to explain to the court of appeals what we think went wrong in this case and why the case came out the way it did. We are confident that once we get our day in the court of appeals, the conviction will be reversed and Martha Stewart will ultimately be determined not to have done anything wrong.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CHAPPELL HARTRIDGE, MARTHA STEWART JUROR: I guess the cover up began when Merrill Lynch started to do their internal investigation and Peter realized that, Oh, boy, I better start covering things up. And then he -- when Doug kept questioning him about what they did, if it was right or not -- Don't worry about it. We're all on the same page. Martha and I, we're all on the same page, so this story. It was a tax loss. It was tax loss. That was around the beginning of it.

(END VIDEO CLIP)

GRACE: The words of one of the Martha Stewart jurors. That was Chappell Hartridge speaking on the courthouse steps immediately following the verdict.

And what a scene it was. Just before we learned what the verdict was, people came pouring out of the courthouse, waving their clothes, their sweaters, smiles on their faces, clearly jubilant. Many people thought a not guilty verdict had been handed down, and then the verdict was announced, guilty on all counts.

Welcome to LARRY KING LIVE. I'm Nancy Grace from Court TV, in for Larry tonight. This is the scene on the courthouse steps, people flooding down. This is just one of them, waving their clothes, practically jubilant. And then we learned it was because a guilty verdict had been handed down.

Let me go to you, Henry Blodget. I was a little surprised at the jubilant nature, the reaction of the court watchers at a guilty verdict.

BLODGET: I think what you were actually seeing there -- because I was shocked by that -- was media people reporting to their TV trucks, and those were color-coded flags to get the verdict out. So I think that's actually what we were seeing.

GRACE: Well, they looked pretty darn happy to me!

BLODGET: We didn't -- yes, we didn't see any of that inside.

DUNNE: We didn't see that, though.

GRACE: You know, in the courtroom, I know that Martha Stewart's daughter, Alexis, was there. This is going to have a profound impact on many, many people. Do you think, Dominick Dunne, that in her mind, Martha Stewart truly believes she did nothing wrong?

DUNNE: I do. I do believe that. Her daughter, by the way, Alexis, is a beautiful, beautiful girl (UNINTELLIGIBLE) She really cried at the -- at the -- at the verdict. And she was all -- did you notice, she was all sort of bent over leaned over. And she'd been very cool throughout the trial, but very loyal to her mother. She hadn't missed a moment there.

GRACE: What I was wondering about, Susan McDougal, when I heard that none of the jurors would even look over to Martha Stewart when they came in to announce the verdict, did you get vibes from your jury before the verdict was announced? Did you get the sense that a guilty verdict was being handed down?

MCDOUGAL: Yes. They wouldn't look at me, either. And it was also a lot of bad character testimony, like you're talking about with Martha, that I had said an expletive. One witness got on the stand and repeated, you know, a curse word that I had said. And those eight women in Sunday school dresses -- and I saw them all flinch.

You know, the bad character testimony was so shocking because I was really prepared to fight the allegations, but I didn't really know how to fight the bad character testimony. And I didn't testify. And to this day, if there's one thing I will never do again -- I had two subsequent trials. So if you ever need someone on who has been through trials, call me. I've been through three major ones. I will always testify on my behalf because people need to know who you are. You're not a caricature. Martha Stewart is not a caricature. She has people who love her, who are about to go through hell if they have to visit her in federal prison.

GRACE: But wait a minute. Wait a minute. Michael Zeldin, just knowing the little bit I know about Martha Stewart, she had to be in on the decision not to testify and take the 5th.

ZELDIN: I expect that's right. These are the critical decisions that lawyers make with their clients, and the clients have a role to play. But in the end, I think most clients say to the lawyer, What's your advice...

GRACE: Exactly.

ZELDIN: ... because they don't have -- they don't have the basis and experience to know this. And so in some sense, yes, she's involved, but in the other sense, she's fully dependent on her lawyers.

People who are charged with crime, who have led upstanding lives, this comes as such a shock to them that it's almost impossible to incorporate it into your daily frame of reference and have a basis to which -- by which to understand what's going on around you.

GRACE: Right. ZELDIN: So you can't really blame Martha Stewart for this decision, if it was a wrong decision. And Susan seems to reflect it is. And I'm suggesting, as well, that, looking back, clearly, she had no opportunity to present who she was to this jury. And I'm sure she's a nice person and could have presented that case, given the chance, but she elected not to, for reasons known to her and her lawyer.

GRACE: Chris Pixley, you know, a lot of people have suggested that Martha Stewart is, in fact, a trophy defendant for some federal prosecutors. On the other hand, due to her celebrity, once it was out that the insider trading was suspected, were federal prosecutors basically back against the wall? What could they do, ignore it and have it held up as an example if they didn't prosecute Martha Stewart, or go for it and see what happens, let the chips fall where they may?

PIXLEY: Nancy, you know this because you had a sterling record yourself. You don't go after defendants when you don't have the case against them. And right now, what they had against Martha Stewart, at best, was a securities fraud, which was dismissed ultimately. And the securities fraud charge itself was just ludicrous.

And that's why I differ with Michael Zeldin on this. You know, Michael makes, I think, a very persuasive argument to the extent that the federal prosecutors really were trying to work with Martha here, that they were doing what they had to do. I disagree with that entirely. If you remember the securities fraud charge itself, it said basically, Look, by publicly defending herself, she must have been trying to prop up the value of her stock. That's as ludicrous as saying a suicide victim did it for the attention. It's just craziness.

GRACE: Yes, I mean -- Chris, with the...

PIXLEY: And it didn't (UNINTELLIGIBLE)

GRACE: ... Kobe Bryant, Scott Peterson, you name it, everybody's claiming, I'm innocent, and they're not prosecuted for making that claim of innocence ,. That's what count 9 was in this indictment, and Judge Cedarbaum did throw out count 9.

As we go to break, take a listen to what Martha Stewart had to say to Larry King. This is pre-trial, just before Christmas.

(BEGIN VIDEO CLIP)

KING: What's the hardest part of this ordeal?

STEWART: Well, sort of coming -- coming to a screeching halt and having to deal with something extremely unpleasant, something that saddens and disheartens me and something that is very, very difficult not only for me but for everyone I work with, my family, my friends. That's the hard part.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

GRACE: Kobe Bryant, Scott Peterson, you name it, everybody's claiming, I'm innocent and they're not prosecuted for making that claim of innocence. That's what count nine was in this indictment and judge Cedarbaum did throw out count nine.

As we go to break, take a listen to what Martha Stewart had to say to Larry King, pretrial, just before Christmas.

(BEGIN VIDEO CLIP)

LARRY KING, HOST: What's the hardest part of this ordeal?

STEWART: Well, sort of kind of coming to a screeching halt and having to deal with something extremely unpleasant, something that saddens and disheartens me and something that is very, very difficult, not only for me, but for everyone I work with, my family, my friends, that's the hard part.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: Do you ever have trouble with the law ever?

STEWART: Do I ever?

KING: Have you ever had any trouble?

STEWART: No.

KING: This is like a shocking point in your life?

STEWART: This is a very, very, very shocking thing.

(END VIDEO CLIP)

GRACE: Welcome back to LARRY KING LIVE. I'm Nancy Grace from Court TV in for Larry tonight. And i want to thank you for being with us.

That is a pretrial statement, an interview that Martha Stewart gave to Larry King just before Christmas, before this trial started off. As you know, a courtroom stunner today, Martha Stewart convicted on all counts. Her co-defendant, Peter Bacanovic convicted on four out of five counts. The two of them are looking at about 20 years behind bars, each count carrying a five year sentence.

Here in the studio with me, Dominic Dunne, you know him well. He's the host of Court TV series, "Power, Privilege and Justice." He's got a special show Sunday night at 11:00 p.m., "Martha Stewart On Trial." He's also written an article "Going After Martha" that will appear in "Vanity Fair."

Also with me here in the studio, from "Slate" magazine, Henry Blodgett. He's been in the courtroom from the get-go, including when the verdict came down today. Susan McDougal is with us. You remember Susan McDougal represented by Mark Geragos. She's the author of "The Woman Who Wouldn't Talk: Why I Refused to Testify Against the Clintons and What I Learned in Jail." And so far what you've told me in 15 minutes is making me change my federal tax return.

Also with me from Atlanta, defense attorney Chris Pixley. And last but certainly not least, former federal prosecutor, Michael Zeldin.

Let's go to you. Michael Zeldin, with friends like these, who needs enemies. And of course, I'm referring to Ann Armstrong, who broke down in tears on the stand when she described a homemade plum pudding Martha made her for Christmas and Mariana Pasternak. Those were the two nails in the coffin, says me. What says you?

ZELDIN: And Faneuil. They were the three-horse in the Apocolypse for her. And she didn't respond on her own behalf. And we've gone through this once or twice already, those people apparently were believed by the jury, because the notes from the jury from the earliest point focused exactly in on the harsh allegations these people made. And there was nothing to counterveil against that. And she lost.

It was straight forward proposition, really. I don't think there wasn't much complication in this case.

GRACE: Dominic Dunne, when you have a friend on the stand, breaks down in tears, testifying against you. In my mind, that even enhances the credibility, clearly, Ann Armstrong did not want to testify against Martha Stewart.

DUNNE: No, she didn't want to testify against her, but on the other hand, the information that she gave about Martha changing the e- mail, which she later countermanded and asked that it be changed back, but it did...

GRACE: Martha Stewart changed the e-mail back.

DUNNE: Martha Stewart changed the e-mail on Ann Armstrong's computer.

GRACE: Right.

DUNNE: And changed the meaning of it. And even though it was changed back to the way it was, I think that that probably had a very strong effect on the jury, because it showed a consciousness of guilt.

GRACE: OK, so we've got Martha Stewart changing an e-mail, and she's doing 20 years behind federal bars. I don't know.

DUNNE: Absolutely ludicrous.

GRACE: There's no doubt in my mind that she changed the e-mail. She might have lied to federal prosecutors.

DUNNE: But she changed it back.

GRACE; Yes, she did change it back. In the backdrop of, for instance Tyco, Worldcom, Adelphia, Enron, where the corporate stars in that arena were like pigs at a trough with their hand in my pocket, and then you got Martha Stewart, I don't know. Michael Zeldin, is that justice?

ZELDIN: I think this speaks very loudly and clearly to the point Justice Rehnquist has made over and over, which is that the federal sentencing guidelines need to be changed, that they aren't fair, they divest courts of the discretion. Martha Stewart probably should not go to jail in this case. Yes, she did something that probably was criminal, clearly, it was wrong. But jail serves no value to her here. But the judge may not have the discretion under the federal sentencing guidelines to impose a probationary sentence on it. This is a big problem.

GRACE: Henry Blodgett, if Martha Stewart gets jail time, the CEOs from Worldcom, Tyco, Adelphia, Enron better line up for hard time, because if Martha Stewart is going to jail. They better come to court with their toothbrush.

BLODGET: One of the big ironies of this case is that it is always cast as one of those cases and this is the first big corporate scandal case. And really what this comes down to is a relationship between a rich woman and her stockbroker, and really didn't have that much to do with the corporate arena other than the timing.

GRACE: You mentioned something interesting, and very quickly Susan McDougal, speaking of Martha Stewart being so rich, I mean a multi-multi-millionaire, did that come into play in their decision to prosecute her and that in the jury's minds, or was any jury really just doing its duty?

MCDOUGAL: Let me tell you, there are thousands and thousands of very poor women in federal prison who answered the telephone and said, my husband, Bubba will meet you at the corner at 2:00 and were convicted of conspiracy. And they're in for 18 years and 20 years and they lost their family Martha, if she goes there, will meet them. One phone call and they're in prison for the rest of their lives. So, that's not unusual.

GRACE: What is so ironic about the whole thing is this entire series of events started when an anti-cancer drug, Erbutux, the word got out that the FDA they were not going to approve it, and immediately Waksal and others started dropping their stock in Imclone. Well, guess what, during the trial, Erbutux was approved.

As we go to break, take a listen to what Donald Trump had to say to Larry.

(BEGIN VIDEO CLIP)

DONALD TRUMP, CEO TRUMP ENTERPRISES: I am devastated that Martha didn't testify. I would have said, testify. Now I might be wrong, and if she's exonerated, I say, OK, I'm wrong. I think this jury... KING: You think the public expects her to...

TRUMP: Well, not the public. The jury. Right now, it doesn't matter what the public thinks. It matters what that jury thinks.

KING: Correct. 12 people.

TRUMP: And I think that jury of 12 people is saying, like, tell us you didn't do it. We don't want to hear from all the secretaries and everything else, many of whom were nullified and badly nullified. You have to get up on the stand. I know it's tough, she has to get up on the stand and she has to say, I didn't do it, I'm innocent. When she said, and her lawyer said, Martha Stewart is not going to testify, the whole jury went like this, as I read and rightfully so. I wish I could have been there.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARBARA WALTERS, ANCHOR, "20/20": I think what is happening to her, I do think that this woman, who has accomplished so much, this is such a difficult and heartbreaking, heartbreaking time, but if she had been a close personal friend, I would not have been able to do the interview with her, I would not have been able to say to her, as I did, Martha, why do so many people hate you? You can't say that to a friend.

(END VIDEO CLIP)

GRACE: Welcome back to LARRY KING LIVE. I'm Nancy Grace from Court TV in for Larry tonight. I want to thank you for being with us. A stunning decision handed down by a jury of 12 in a New York federal courtroom today. Martha Stewart found guilty on all counts, her co- defendant Bacanovic found guilty on four of five counts. They're looking at 20 years behind bars, each count carrying five years. Let me go to you Dominick Dunne, you have been spending time with Martha Stewart. You two are friends. You've had many lunches with her in the weeks and days leading up to the trial. What was her frame of mind?

DUNNE: I tell you, she didn't eat in the same place that the rest of us did. They had three offices upstairs, one for Martha, one for Peter Bacanovic and then an interim one. That's where they had lunch every day. I went up three or four times and had lunch with them there. I was always amazed how calm she was. The lawyers would be there, they'd be talking, then she'd go over and talk to her daughter. It was not a social thing, in any way, it wasn't like fun, but it was -- it was very quiet and she seemed very together to me all through it.

GRACE: Speaking of what went down in the courtroom, there was a series of high profile well wishers parading in and out of the courtroom, for instance Barbara Walters, of course, Bill Cosby, Brian Dennehy, even Rosie O'Donnell showed up to support Martha Stewart. Don't know, Henry Blodget, whether that helped or hurt. I understand Cosby never even took off his sunglasses, so much for star value. Did anybody recognize him?

BLODGET: He did not. Dominick would be the one who probably should comment on this.

DUNNE: They didn't recognize him, except for one juror. I could see that she was kind of confused that it was he. And whereas Rosie was there, up there, talking and gesturing...

ZELDIN: Badgering the prosecutors.

GRACE: I understand, tried to bribe the prosecutor with some M&Ms? Will they indict her for that? Let me go to you, Susan McDougal, I'm not saying Martha Stewart is innocent, I'm not saying she didn't dump the stocks and change the e-mail and change it back. This is what I want. I want lady justice to be blind, for everyone to be treated equally under the law. If she goes to jail, they all go to jail in her same situation. Otherwise, do you suspect that she was targeted because of her celebrity?

MCDOUGAL: I think when that juror came out -- targeted for prosecution because of her celebrity, you know, I kind of agree with the prosecutor, who's there with you. I think that she lied to them, and you don't do that. I think it gets to be a very personal thing. And they said, you know, she's not going to tell us the truth. We're going to get her.

I think it became between them a contest of who was going to win that thing. I think when the juror came out, though, after, is when I really lost -- I felt my stomach doing flips when he said this is a victory for the little guy. Martha Stewart was the little guy. She was very poor growing up. She worked hard. This is America. This is what we believe in, that you can work hard and make money and be somebody. For him to come out and say, you know, this is a victory for the little guy, I thought that was so very wrong. He just didn't get it.

GRACE: Dominick.

ZELDIN: I agree with that. I think, Nancy, that is a horrible thing for that juror to have said. This is, no matter what side of the criminal justice fence you sit on, defense or prosecution, this is a very sad day. No one can be happy with this. I expect the prosecutors aren't happy about this. Sure, it's nice to win but there's a lot of sadness around here. She's suffering, her family is suffering. It's a sad day. For someone to think that...

GRACE: But Michael Zeldin...

ZELDIN: Somehow this vindicated a little guy is off base and inappropriate.

GRACE: That this nature of the justice system. Nobody is jubilant, normally, when they leave the courtroom. There's nothing easy to swallow in any of these facts. Bringing down Martha, I would hope, was not the goal of the federal prosecutors, but I want to go back to something Susan Mcdougal said. Dominic Dunn, speaking of Martha Stewart, coming from nowhere, being a nobody, in a small town in New Jersey, and working her way to the top of a corporate empire, who is Martha?

DUNNE: Absolutely. She's the absolute American dream. She found a niche in American life that needed to be found. She brought this extraordinary taste at a cheap price to people that they have never had before. And she created an empire out of that. She's the hardest working woman I ever saw.

MCDOUGAL: Nancy, that juror was jubilant. You said there was no jubilance. There was. He was very happy and jubilant at his victory for the little guy. That's what really kind of made me sick. You know, Martha, come back with a very gracious remark. Instead we had whatever was read on television, I'll fight to the end. I wanted in juxtaposition to that guy holding his arm up and yelling we've got her, this is a victory for the little guy, for her to come back in a gracious way to say, this an awful day for my family and myself and there'll be another day. Something quiet and gracious. Martha, my advice is lead your life that way from this day forward because everyone's watch you.

ZAHN: The question is, in my mind, was she a target for federal prosecutors or is this simply justice being carried out and meted against someone regardless of their station in life, their bank account, their vanguard portfolio, is this about justice being blind or did federal prosecutors peek up under the blindfold and go, hey, a celebrity target.

PIXLEY: Absolutely. A celebrity target. Think about it, Nancy. You can convict 1,000 people in 2004 for these charges, obstruction of justice involving a small stock trade and not get all the attention you get for convicting Martha Stewart.

GRACE: I don't know, if she did it, she did it. There you have it.

PIXLEY: If she did it, she did it. And one of the problems with what we're hearing about this juror coming out and making a statement after the verdict was read is the fact that, you know, people think, OK, Martha Stewart's big, she's important. Her defense team actually played into that with their closing. But I don't want the jury to see her as something that's bigger than life.

GRACE: Hold that thought. I'm hearing in my ear I've got to go to break. We'll go to break with this interview. Take a listen to this byte.

(BEGIN VIDEO CLIP)

KING: Do you think beyond the trial?

STEWART: Absolutely.

KING: You do?

STEWART: Oh, absolutely.

KING: In?

STEWART: In all aspects of my life. I can't wait to get my life back.

KING: That's what I meant by, what do you do on getting your life back? Do you just go right on? Let's assume everything is great and you're acquitted. Now what?

STEWART: Nothing's -- nothing really has changed. The products we make are fantastic, the books we write are wonderful and informative. The products, the magazines are fantastic. All those people, in place, working so hard to keep our business as wonderful as it always has been, that is what's there.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

GRACE: Welcome back to LARRY KING LIVE. I'm Nancy Grace from Court TV in for Larry tonight. I want to thank you for being with us.

What a day. In an American courtroom, Martha Stewart convicted on all counts. Final thoughts, Chris Pixley?

PIXLEY: Well, just to finish, one thought. When a juror says this is a victory for the little guy, it reminds you that there is a real danger of bringing too much celebrity into the courtroom. I want jurors to see my defendants as one of them, because I want jurors to ask themselves the question, what if this was me, what if I was the defendant. I think in this case, if jurors had asked that question, they would realize that obstruction of justice charges in this circumstance are ridiculous.

GRACE: Michael Zeldin?

ZELDIN: Well, I agree that you have to make your client likable. And that that was failure in this case. I disagree that this obstruction of justice charge was ludicrous. And I think that the prosecution probably felt constrained to bring it under the circumstances in which it arose. I don't think they were happy to do that.

GRACE: And you say federal prosecutors were just doing their job. Susan McDougal, final thought?

MCDOUGAL: I think if she has one regret, it will be that she didn't testify. I lay many nights in jail thinking, why didn't I just get up there and tell those jurors who I was and what happened? And it was on advice of counsel. And I thought I was too -- I really thought I was unable to tell my story. And looking back on it, of anything in my life, I regret not standing before that jury, because it was better to have told them and lost than not to have spoken and lost.

GRACE: So your thought is Martha should have taken the stand?

MCDOUGAL: Absolutely. She's a fighter. She's well-spoken. She is earnest in her -- you know, when I've watched her on television. And I think she could have touched one heart on that jury.

GRACE: Wow. And Henry Blodget, you've been in the courtroom from the get-go for "Slate" magazine. Final thoughts?

BLODGET: Well, we've talked a lot about why the government has done this, whether it helped them, whether it was selective. All I can say is from watching in the courtroom, the prosecutors who tried this case did a wonderful job. And they were completely straightforward and disarming. And I think that that's one thing we haven't brought up. I think that's one of the reasons Martha Stewart was convicted. And certainly there didn't seem to be any ulterior motive.

GRACE: Well, that's very important, because many people have been saying Martha Stewart has been a celebrity client. You're saying otherwise.

BLODGET: They did play the card that we talked about earlier, which is the a secret tip to the rich person and so forth, but aside from that, they really clearly believed in what they were doing, and that obviously I think washed under the jury.

GRACE: And finally, Dominick Dunne.

DUNNE: And finally, Dominick Dunne. Well, you know, I agree with Susan. I wish she had taken the stand. I think she could have absolutely charmed that jury, totally and completely.

GRACE: What a day in a New York courtroom. Martha Stewart found guilty on all counts. She is looking at multiple years behind bars. That sentencing going down in June. Her co-defendant, Bacanovic, also found guilty.

I'm Nancy Grace from Court TV, in for Larry King tonight, and I want to thank you for being with us this evening and inviting us into your home. Sunday evening, Larry will play the entire interview with Martha Stewart, so stay tuned for that. Again, thank you for being with us, and stay tuned for Wolf Blitzer, he's in for Aaron Brown. Good night.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired March 5, 2004 - 21:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
NANCY GRACE, GUEST HOST: Tonight: a stunning courtroom verdict, Martha Stewart found guilty on all counts. She could face up to 20 years behind bars. We go live for eyewitness accounts inside that federal courtroom. Tonight, Martha's close friend, Dominick Dunne, the host of Court TV's "Power, Privilege and Justice"; Henry Blodget, in the courtroom from the beginning of the Martha Stewart trial for "Slate" magazine; also with us, Susan McDougal -- Susan McDougal spent nearly two years behind federal bars in the Whitewater case -- plus defense attorney Chris Pixley; former federal prosecutor Michael Zeldin all next on LARRY KING LIVE.
Welcome to LARRY KING LIVE. I'm Nancy Grace from Court TV, in for Larry tonight. Thank you for being with us.

A courtroom stunner today, Martha Stewart convicted on all counts, sentencing set down for June 12.

With me here in the studio, Mr. Blodget, you were there throughout the trial. What went down when the verdict was read? Who read it, and what was the reaction?

HENRY BLODGET, FORMER SECURITIES ANALYST, IN COURT ENTIRE TRIAL: The judge read it. Certainly, there was a lot of shock. I think when we saw the jury file in, we didn't see them smile at Martha. That was a bad sign. But still, one after the other, four counts in a row of guilty, very shocking, and certainly, to me, anyway, a surprise.

GRACE: Dominick, you are a friend of Martha Stewart's. You have been there in the courtroom from the beginning. You're writing an article, "Going After Martha," that's going to appear in "Vanity Fair." What was her reaction when the verdict was read? I've heard many different conflicting accounts.

DOMINICK DUNNE, FRIEND OF STEWART, IN COURTROOM TODAY: Well, I think Henry and I agreed totally. There was no reaction from her. She was looking straight ahead. Her expression did not change.

GRACE: You know, I even noticed, as she was coming out of the courthouse and walking down the steps of the federal court building, she looked over at some supporters and actually managed to smile.

(CROSSTALK)

GRACE: This has been her expression throughout -- stoic, composed. Even when the jury filed in, Dominick, I understand none of them could look at her. DUNNE: None of them...

GRACE: Is that true?

DUNNE: You can always tell...

GRACE: Oh, yes.

DUNNE: You can always when the jury comes in. You know, if they -- if they look toward the defense table, you know -- and not one of them looked in that direction.

GRACE: Michael Zeldin, former federal prosecutor, are you surprised at the jury's verdict and their relatively short degree of deliberations? This was day three.

MICHAEL ZELDIN, FORMER FEDERAL PROSECUTOR: No, I think it was pretty straightforward case after the one count was thrown out, which was, Did you believe the government witnesses? And if you did, what was the response from the defense? And there was no response from the defense. And so, clearly, the jury credited the testimony of the government witnesses, and that was the end of the case. There was not much to deliberate.

GRACE: You know, Michael, I was very surprised they did not call Martha Stewart to the stand. Many court watchers speculated that Stewart was probably smarter than all the lawyers put together and could hold up very well on cross-examination. They chose for her to enact her right to remain silent. Mistake?

ZELDIN: Well, after the fact of a guilty verdict, of course it's a mistake. But it's hard to know without having been there to know whether or not she was a credible witness or not. She had a story to tell. She told it on LARRY KING LIVE and elsewhere in the public domain. She protested her innocence. And then when she had her day in court, she remained silent. I think jurors probably had a problem with that. But clearly, Morvillo, who's a terrific lawyer, knew better his client and how well she would fare under cross-examination from very good prosecutors.

GRACE: Chris Pixley, what are we looking at now? What's the minimum, the maximum and the most likely sentence for Martha Stewart?

CHRIS PIXLEY, DEFENSE ATTORNEY: Well, if the judge stays with the base offense level, Nancy, the likely sentence is going to be 15 to 21 months. Now, the maximum is up to five years. I don't expect any downward or upward departures in this case, and we're dealing with federal sentencing guidelines. So in the federal domain, the judge has to work within certain confines. In this case, I think that Martha Stewart will get the lower end of the possible range, but you're still looking at between 15 and 21 months, at least 15 months in a minimum-security penitentiary. So it's a serious sentence.

GRACE: Speaking of a minimum-security federal penitentiary, let's go to Susan McDougal. Susan is now the author of "The Woman Who Wouldn't Talk: Why I Refused to Testify Against the Clintons and What I Learned in Jail." Susan McDougal, who was represented by Mark Geragos in her case, served time behind federal bars, about 18 months, as I recall, on a contempt charge.

What's your advice for Martha Stewart tonight?

SUSAN MCDOUGAL, SERVED 22 MONTHS ON WHITEWATER CHARGE: Gosh. The advice I would give her is to go into it with an attitude of humility. I know that she's scared and I know she's worried about it. I know she's angry because I was so angry, there were nights when I first went in that I used to dream of torturing Kenneth Starr. I mean, I would dream all sorts of tortures for him, and it would -- it was the only thing that got me through.

But you know, the thing I learned more than anything else is that there are scores and scores of women in there, all of them with a story. And she can spend that time in humility and come out a better person. I think I did. I think I'm a much better person for having gone in there and met the women that I met. And I'm going to give her the advice of being just like everybody else in there.

Of course, there's not much choice because you're issued your clothing on the very first day, and your number, and that's how you're referred to by staff and by the other people there. But I think, also, the women will be waiting for her. They're watching this case very closely. They'll know that she'll be coming to their place. And when she gets there, there will be people waiting to help her and there will be people waiting to give her a very hard time.

GRACE: You know, Henry Blodget, I think the money was on Martha, if anybody was of the betting frame of mind. If you take a look at the stock market this past week, her stock was trading up all the way leading up to this verdict. Of course, today, when the guilty verdict was announced, trading for Martha Stewart Omnimedia halted. It picked up later, but by the end of the day, it had dropped 20 percent in one day. But the money was on Martha Stewart to beat this thing all week, as we led up to the verdict. What went wrong?

BLODGET: Well, I think that's right. The stock actually, when there was the rumor that the verdict had been announced, the stock actually rose this afternoon. And then when it came out, as you said, it plummeted. I think that people who really had been listening to the evidence and had been watching a lot of the commentary believed there was a very good chance the jury would have a tough time convicting Martha Stewart. And I certainly really thought so, and I thought that you could get to reasonable doubt on each count if you really analyzed it. The jury disagreed. It was big surprise.

GRACE: Dominick Dunne, do you think that Martha Stewart was portrayed in front of this jury as a mean-spirited person? You had Faneuil take the stand -- Douglas Faneuil is the state's chief witness in this case, and he portrayed Martha very badly, for instance, complaining about the Musak on the phone when she was on hold, describing her voice as a lion roaring under water, making her appear as if she mistreated her underlings. Was this some kind of a popularity contest? I thought this was a felony trial.

DUNNE: Well, you know, I think...

GRACE: Nobody ever said Martha was nice, OK?

DUNNE: You know, she is nice, though. I happen to know her and like her, and she is nice. I think she does have that other side to her, where she is -- she does talk bad to people, you know?

GRACE: Well, don't we all...

DUNNE: And don't we all?

GRACE: ... have a bad side? I'm just shocked that...

DUNNE: And I think that keeps coming out because she's a woman. I mean, you know, Jack Welch, one of the great CEOs of all time, yelled at people. I mean, and -- but you never heard that about him. So I mean, they kept -- they kept -- and as for the Musak thing, I'm going to leave Merrill Lynch because -- I mean, you know, that -- knowing her as I do, she could have said that as a joke.

BLODGET: A joke. Clearly.

DUNNE: As a joke.

BLODGET: It was very funny. It was A funny line in the...

DUNNE: I mean, it was a funny line...

(CROSSTALK)

DUNNE: This wasn't -- you know, and it was presented as a kind of bitchy line.

GRACE: Well, long story short, to you, Michael Zeldin, did this turn into a issue of who went home Miss Congeniality and it ended up costing Martha Stewart time behind federal bars?

ZELDIN: Well, no, I don't think this was a Miss Congeniality contest. I think that you always learn, as a defense lawyer, that you've got to make your client liked by the jury. You have to be liked by the jury, and you have to believe -- the jury has to believe that you're telling the truth in what you say. And clearly, she failed on one or two of those scores. They didn't like her. And they didn't feel she was telling the truth.

Now, she told the truth, if you will, through the cross- examination of government witnesses, and as I said, not through her own mouth. But she wasn't presented as a likable person by her own staff. And when she didn't come back in her own defense to say, you know, I'm not that way, this was a joke, and this is what I was doing and this is who I am, they have no choice but to view her in her public persona.

GRACE: That's right, since her defense...

ZELDIN: And she lost for that. GRACE: ... decided not to put her on the stand. You know, Larry King talked to Martha Stewart just before Christmas, her last interview before her trial started.

ZELDIN: Right. I saw that.

GRACE: Because that trial was still pending at the time, she couldn't discuss the facts of the case or the specifics of the legalities. And she spoke for herself, not for Martha Stewart Living Omnimedia. Here's some of that.

(BEGIN VIDEO CLIP - DECEMBER 22, 2003)

LARRY KING, HOST: Is all of this very shocking to you?

MARTHA STEWART: No one is ever prepared for such a thing.

KING: I wouldn't imagine.

STEWART: No one. And no one is ever strong enough for such a thing. No one is -- you know, you don't -- you have no idea how much worry and sadness and grief it causes.

KING: And I would imagine, especially if someone thinks, I didn't do anything wrong.

STEWART: Exactly.

KING: So that's got to drive you berserk.

STEWART: Well, but that -- having done nothing wrong allows you to sleep, allows you...

GRACE: It does?

STEWART: ... allows you to continue your work, gives you -- gives you the opportunity to think about other things. But there's always the worry. I mean, a trial's coming up.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

DAVID KELLEY, U.S. ATTORNEY: If you are John Q. Citizen or Martha Stewart or Peter Bacanovic, we're going to go after you if you make these types of lies. We do cases each and every day. We do large ones, we do small ones and we do cases that draw some attention but some cases that don't draw all this attention. Nonetheless, all those cases are equally important.

(END VIDEO CLIP)

GRACE: A stunning courtroom verdict today, Martha Stewart found guilty on all counts lodged against her, her co-defendant, Peter Bacanovic, found guilty of four out of five counts. Each one of these counts carries a sentence of five years behind bars. Sentencing now set down for June 12.

Welcome back to LARRY KING LIVE. I'm Nancy Grace, in for Larry tonight. And I want to thank you for being with us.

Let me go to you, Henry Blodget. What I want to find out is the atmosphere in that courtroom. We could see a little bit, but we weren't there. Was it the home team or was it an away game for Martha Stewart? Were people on her side in the courtroom?

BLODGET: I think a lot of people were very much on her side. There's a lot of sympathy. Obviously, her PR campaign over the last six months has really paid off, in terms of, I think, building a lot of public sympathy. But really, after lunch, we all come back, we expected the jury to deliberate all day. Suddenly, there was a buzz that the verdict came in. The tension just began to build. And again, when the verdict was delivered, it was very shocking.

GRACE: Well, Chris Pixley, I felt the buzz on Thursday because you and I know from trying cases, you're looking at Friday afternoon, the jury knows they've got to come back on Monday. Forget about it! Were you surprised, or was it that you expected a Friday afternoon verdict, Chris?

PIXLEY: I expected the verdict to come in, actually, this week, Nancy, for some of the reasons that you're mentioning, but most importantly, a reason mentioned earlier tonight, and that's the fact that these charges were fairly simple.

You know, the -- really, the travesty here is that the government didn't prove that Martha Stewart committed any crime. What they proved is during the course of their investigation that she lied to them. And that was a fairly simple showing. They were able to bring in witnesses who simply contradicted Martha Stewart's statements or the statements of her own attorneys in the process, and of Peter Bacanovic. And Martha Stewart didn't take the stand to refute any of those contradictions. So it came down to being a fairly simple question.

The real problem is the obstruction of justice charges are just a trap for the unwary. We put defendants in this terrible position of being on the receiving end of a criminal investigation, and then we expect them to act perfectly. And even if the government can't prove the charges against them, if they can prove that they lied, they go to jail.

GRACE: Michael Zeldin, I know one thing, after seeing this verdict today, I'm going to redo my federal taxes and check out a few of those deductions I claimed because if you look at 20 years in the pen for lying -- you know, I would guarantee you 80 percent of people's federal tax returns have a lie on there somewhere. But why Martha Stewart? Michael Zeldin, you know as well as I do that insider trading is endemic within the system. My cousin's brother told me this. My baby-sitter's dad said this. Why Martha Stewart on trial, Michael? ZELDIN: Because she lied to the government, and the government doesn't like to be lied to. I mean, it's not really that Martha Stewart, I think, was picked on. In fact, in some respect, I think you could argue that Martha Stewart was given a break by not being charged with insider trading because, clearly, the evidence supports the proposition that she received a piece of insider information and acted upon it. That's classic insider trading. But the government, in some respects...

GRACE: But you think that was giving her a break, or the feds felt they couldn't prove it?

ZELDIN: Well, you can argue it either way. They proved what they needed to prove pretty simply and pretty quickly. So I'm not sure that I buy into the notion Martha Stewart was victimized because she was wealthy and powerful or because she was mean or anything of that sort. I think that, basically, it came down to the government asked her what happened, she made up a story that they didn't believe, she showed no contrition in the process. I expect that there were plea offers made to her over the course of this that involved her acknowledgement of responsibility, which she rejected. And they were left with nothing but a trial.

I just -- my experience as a federal prosecutor tells me that when the government comes to you and says, Look, if you play ball with us, if you acknowledge wrongdoing, we are willing to work with you -- I think that's true in most cases, and there was nothing here to work with. And she got the consequences of that failure to cooperate.

GRACE: Yes, Dominick...

MCDOUGAL: God forbid you should be innocent and not want to cooperate.

(CROSSTALK)

MCDOUGAL: I absolutely agree with him. They will come to you and they'll say, You're guilty, and will you cooperate with us, and we'll give you a great deal. And God help you if you're innocent. God help you if you don't believe that you're guilty...

GRACE: Hey, Susan...

MCDOUGAL: ... and you want to fight the charges.

ZELDIN: Well, but Susan -- Susan, you...

GRACE: Susan McDougal, question...

ZELDIN: ... went to trial and were found not guilty. I mean, you -- you did -- you did exactly that. You went to trial and were found not guilty and -- and...

MCDOUGAL: But in my first trial, I didn't testify. I was just like Martha. I thought, You know, I'm not guilty of this. They're going to see it. I had eight women and four men, and you know what happened? The women hated me. They came in with a guilty verdict, laughing. They were laughing when they came into the jury box.

GRACE: Susan McDougal...

(CROSSTALK)

GRACE: ... ask you a question before we go to break...

MCDOUGAL: ... bad character evidence.

GRACE: Susan, we've all seen "Martha Stewart Living" on television. Whether we've attempted her projects or not, we've seen it. We've seen Turkey Hill. We've seen the beautiful surroundings she has created for herself. What is one day like in the women's federal penitentiary? What is a day in the life for Martha Stewart?

MCDOUGAL: Well, every visitor she has, if it is her daughter, her minister, every single visitor, she will be taken to a secluded area and strip-searched. She will be asked to bend over and to show her vaginal area, her anal area. It depends on the guard how very rough that search gets or how nice it can be. And some of the guards are very cruel. And I think that was one of the most shocking things. I used to say, Look, I've had three visits. I don't need any more today. That is a very cruel thing for a woman to go through.

When you get to visiting, for instance, they won't let you leave any time you want. For women, there aren't enough guards, and so you might need to go to the bathroom. Say that you are having your period. You might sit there and have blood all over the seat, all over your clothes, and no one to take you back to your cell. It is a very humiliating, daily humiliation that you're not used to.

I saw a 70-year-old lovely woman, hair up in a silver bun, from Florida, who had been convicted with her husband on some charge -- I've forgotten what it was -- beaten with a phone because she had dared to speak, you know, unkindly to someone who had gotten in front of her in a line, beaten unconscious in a secluded area of a federal prison. And I really think -- more than anything, I want to say don't think that Martha Stewart's going to learn tennis because every room you walk into in a federal institution is a fearful place. You don't know who's there...

GRACE: Susan McDougal, we have got...

MCDOUGAL: ... and what's happening.

GRACE: ... to go to break.

We are discussing the Martha Stewart verdict -- as you know by now, Martha Stewart found guilty on all counts. Was she a trophy defendant for a couple of federal prosecutors, or did the state show that no one, no matter how great, is subject to the laws of this land? Take a listen to her defense attorney, Robert Morvillo.

(BEGIN VIDEO CLIP)

ROBERT MORVILLO, ATTORNEY FOR MARTHA STEWART: We are disappointed at the outcome. We look at this as having lost the first round. We look at this as an opportunity for us to go to the next rounds and to explain to the court of appeals what we think went wrong in this case and why the case came out the way it did. We are confident that once we get our day in the court of appeals, the conviction will be reversed and Martha Stewart will ultimately be determined not to have done anything wrong.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CHAPPELL HARTRIDGE, MARTHA STEWART JUROR: I guess the cover up began when Merrill Lynch started to do their internal investigation and Peter realized that, Oh, boy, I better start covering things up. And then he -- when Doug kept questioning him about what they did, if it was right or not -- Don't worry about it. We're all on the same page. Martha and I, we're all on the same page, so this story. It was a tax loss. It was tax loss. That was around the beginning of it.

(END VIDEO CLIP)

GRACE: The words of one of the Martha Stewart jurors. That was Chappell Hartridge speaking on the courthouse steps immediately following the verdict.

And what a scene it was. Just before we learned what the verdict was, people came pouring out of the courthouse, waving their clothes, their sweaters, smiles on their faces, clearly jubilant. Many people thought a not guilty verdict had been handed down, and then the verdict was announced, guilty on all counts.

Welcome to LARRY KING LIVE. I'm Nancy Grace from Court TV, in for Larry tonight. This is the scene on the courthouse steps, people flooding down. This is just one of them, waving their clothes, practically jubilant. And then we learned it was because a guilty verdict had been handed down.

Let me go to you, Henry Blodget. I was a little surprised at the jubilant nature, the reaction of the court watchers at a guilty verdict.

BLODGET: I think what you were actually seeing there -- because I was shocked by that -- was media people reporting to their TV trucks, and those were color-coded flags to get the verdict out. So I think that's actually what we were seeing.

GRACE: Well, they looked pretty darn happy to me!

BLODGET: We didn't -- yes, we didn't see any of that inside.

DUNNE: We didn't see that, though.

GRACE: You know, in the courtroom, I know that Martha Stewart's daughter, Alexis, was there. This is going to have a profound impact on many, many people. Do you think, Dominick Dunne, that in her mind, Martha Stewart truly believes she did nothing wrong?

DUNNE: I do. I do believe that. Her daughter, by the way, Alexis, is a beautiful, beautiful girl (UNINTELLIGIBLE) She really cried at the -- at the -- at the verdict. And she was all -- did you notice, she was all sort of bent over leaned over. And she'd been very cool throughout the trial, but very loyal to her mother. She hadn't missed a moment there.

GRACE: What I was wondering about, Susan McDougal, when I heard that none of the jurors would even look over to Martha Stewart when they came in to announce the verdict, did you get vibes from your jury before the verdict was announced? Did you get the sense that a guilty verdict was being handed down?

MCDOUGAL: Yes. They wouldn't look at me, either. And it was also a lot of bad character testimony, like you're talking about with Martha, that I had said an expletive. One witness got on the stand and repeated, you know, a curse word that I had said. And those eight women in Sunday school dresses -- and I saw them all flinch.

You know, the bad character testimony was so shocking because I was really prepared to fight the allegations, but I didn't really know how to fight the bad character testimony. And I didn't testify. And to this day, if there's one thing I will never do again -- I had two subsequent trials. So if you ever need someone on who has been through trials, call me. I've been through three major ones. I will always testify on my behalf because people need to know who you are. You're not a caricature. Martha Stewart is not a caricature. She has people who love her, who are about to go through hell if they have to visit her in federal prison.

GRACE: But wait a minute. Wait a minute. Michael Zeldin, just knowing the little bit I know about Martha Stewart, she had to be in on the decision not to testify and take the 5th.

ZELDIN: I expect that's right. These are the critical decisions that lawyers make with their clients, and the clients have a role to play. But in the end, I think most clients say to the lawyer, What's your advice...

GRACE: Exactly.

ZELDIN: ... because they don't have -- they don't have the basis and experience to know this. And so in some sense, yes, she's involved, but in the other sense, she's fully dependent on her lawyers.

People who are charged with crime, who have led upstanding lives, this comes as such a shock to them that it's almost impossible to incorporate it into your daily frame of reference and have a basis to which -- by which to understand what's going on around you.

GRACE: Right. ZELDIN: So you can't really blame Martha Stewart for this decision, if it was a wrong decision. And Susan seems to reflect it is. And I'm suggesting, as well, that, looking back, clearly, she had no opportunity to present who she was to this jury. And I'm sure she's a nice person and could have presented that case, given the chance, but she elected not to, for reasons known to her and her lawyer.

GRACE: Chris Pixley, you know, a lot of people have suggested that Martha Stewart is, in fact, a trophy defendant for some federal prosecutors. On the other hand, due to her celebrity, once it was out that the insider trading was suspected, were federal prosecutors basically back against the wall? What could they do, ignore it and have it held up as an example if they didn't prosecute Martha Stewart, or go for it and see what happens, let the chips fall where they may?

PIXLEY: Nancy, you know this because you had a sterling record yourself. You don't go after defendants when you don't have the case against them. And right now, what they had against Martha Stewart, at best, was a securities fraud, which was dismissed ultimately. And the securities fraud charge itself was just ludicrous.

And that's why I differ with Michael Zeldin on this. You know, Michael makes, I think, a very persuasive argument to the extent that the federal prosecutors really were trying to work with Martha here, that they were doing what they had to do. I disagree with that entirely. If you remember the securities fraud charge itself, it said basically, Look, by publicly defending herself, she must have been trying to prop up the value of her stock. That's as ludicrous as saying a suicide victim did it for the attention. It's just craziness.

GRACE: Yes, I mean -- Chris, with the...

PIXLEY: And it didn't (UNINTELLIGIBLE)

GRACE: ... Kobe Bryant, Scott Peterson, you name it, everybody's claiming, I'm innocent, and they're not prosecuted for making that claim of innocence ,. That's what count 9 was in this indictment, and Judge Cedarbaum did throw out count 9.

As we go to break, take a listen to what Martha Stewart had to say to Larry King. This is pre-trial, just before Christmas.

(BEGIN VIDEO CLIP)

KING: What's the hardest part of this ordeal?

STEWART: Well, sort of coming -- coming to a screeching halt and having to deal with something extremely unpleasant, something that saddens and disheartens me and something that is very, very difficult not only for me but for everyone I work with, my family, my friends. That's the hard part.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

GRACE: Kobe Bryant, Scott Peterson, you name it, everybody's claiming, I'm innocent and they're not prosecuted for making that claim of innocence. That's what count nine was in this indictment and judge Cedarbaum did throw out count nine.

As we go to break, take a listen to what Martha Stewart had to say to Larry King, pretrial, just before Christmas.

(BEGIN VIDEO CLIP)

LARRY KING, HOST: What's the hardest part of this ordeal?

STEWART: Well, sort of kind of coming to a screeching halt and having to deal with something extremely unpleasant, something that saddens and disheartens me and something that is very, very difficult, not only for me, but for everyone I work with, my family, my friends, that's the hard part.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: Do you ever have trouble with the law ever?

STEWART: Do I ever?

KING: Have you ever had any trouble?

STEWART: No.

KING: This is like a shocking point in your life?

STEWART: This is a very, very, very shocking thing.

(END VIDEO CLIP)

GRACE: Welcome back to LARRY KING LIVE. I'm Nancy Grace from Court TV in for Larry tonight. And i want to thank you for being with us.

That is a pretrial statement, an interview that Martha Stewart gave to Larry King just before Christmas, before this trial started off. As you know, a courtroom stunner today, Martha Stewart convicted on all counts. Her co-defendant, Peter Bacanovic convicted on four out of five counts. The two of them are looking at about 20 years behind bars, each count carrying a five year sentence.

Here in the studio with me, Dominic Dunne, you know him well. He's the host of Court TV series, "Power, Privilege and Justice." He's got a special show Sunday night at 11:00 p.m., "Martha Stewart On Trial." He's also written an article "Going After Martha" that will appear in "Vanity Fair."

Also with me here in the studio, from "Slate" magazine, Henry Blodgett. He's been in the courtroom from the get-go, including when the verdict came down today. Susan McDougal is with us. You remember Susan McDougal represented by Mark Geragos. She's the author of "The Woman Who Wouldn't Talk: Why I Refused to Testify Against the Clintons and What I Learned in Jail." And so far what you've told me in 15 minutes is making me change my federal tax return.

Also with me from Atlanta, defense attorney Chris Pixley. And last but certainly not least, former federal prosecutor, Michael Zeldin.

Let's go to you. Michael Zeldin, with friends like these, who needs enemies. And of course, I'm referring to Ann Armstrong, who broke down in tears on the stand when she described a homemade plum pudding Martha made her for Christmas and Mariana Pasternak. Those were the two nails in the coffin, says me. What says you?

ZELDIN: And Faneuil. They were the three-horse in the Apocolypse for her. And she didn't respond on her own behalf. And we've gone through this once or twice already, those people apparently were believed by the jury, because the notes from the jury from the earliest point focused exactly in on the harsh allegations these people made. And there was nothing to counterveil against that. And she lost.

It was straight forward proposition, really. I don't think there wasn't much complication in this case.

GRACE: Dominic Dunne, when you have a friend on the stand, breaks down in tears, testifying against you. In my mind, that even enhances the credibility, clearly, Ann Armstrong did not want to testify against Martha Stewart.

DUNNE: No, she didn't want to testify against her, but on the other hand, the information that she gave about Martha changing the e- mail, which she later countermanded and asked that it be changed back, but it did...

GRACE: Martha Stewart changed the e-mail back.

DUNNE: Martha Stewart changed the e-mail on Ann Armstrong's computer.

GRACE: Right.

DUNNE: And changed the meaning of it. And even though it was changed back to the way it was, I think that that probably had a very strong effect on the jury, because it showed a consciousness of guilt.

GRACE: OK, so we've got Martha Stewart changing an e-mail, and she's doing 20 years behind federal bars. I don't know.

DUNNE: Absolutely ludicrous.

GRACE: There's no doubt in my mind that she changed the e-mail. She might have lied to federal prosecutors.

DUNNE: But she changed it back.

GRACE; Yes, she did change it back. In the backdrop of, for instance Tyco, Worldcom, Adelphia, Enron, where the corporate stars in that arena were like pigs at a trough with their hand in my pocket, and then you got Martha Stewart, I don't know. Michael Zeldin, is that justice?

ZELDIN: I think this speaks very loudly and clearly to the point Justice Rehnquist has made over and over, which is that the federal sentencing guidelines need to be changed, that they aren't fair, they divest courts of the discretion. Martha Stewart probably should not go to jail in this case. Yes, she did something that probably was criminal, clearly, it was wrong. But jail serves no value to her here. But the judge may not have the discretion under the federal sentencing guidelines to impose a probationary sentence on it. This is a big problem.

GRACE: Henry Blodgett, if Martha Stewart gets jail time, the CEOs from Worldcom, Tyco, Adelphia, Enron better line up for hard time, because if Martha Stewart is going to jail. They better come to court with their toothbrush.

BLODGET: One of the big ironies of this case is that it is always cast as one of those cases and this is the first big corporate scandal case. And really what this comes down to is a relationship between a rich woman and her stockbroker, and really didn't have that much to do with the corporate arena other than the timing.

GRACE: You mentioned something interesting, and very quickly Susan McDougal, speaking of Martha Stewart being so rich, I mean a multi-multi-millionaire, did that come into play in their decision to prosecute her and that in the jury's minds, or was any jury really just doing its duty?

MCDOUGAL: Let me tell you, there are thousands and thousands of very poor women in federal prison who answered the telephone and said, my husband, Bubba will meet you at the corner at 2:00 and were convicted of conspiracy. And they're in for 18 years and 20 years and they lost their family Martha, if she goes there, will meet them. One phone call and they're in prison for the rest of their lives. So, that's not unusual.

GRACE: What is so ironic about the whole thing is this entire series of events started when an anti-cancer drug, Erbutux, the word got out that the FDA they were not going to approve it, and immediately Waksal and others started dropping their stock in Imclone. Well, guess what, during the trial, Erbutux was approved.

As we go to break, take a listen to what Donald Trump had to say to Larry.

(BEGIN VIDEO CLIP)

DONALD TRUMP, CEO TRUMP ENTERPRISES: I am devastated that Martha didn't testify. I would have said, testify. Now I might be wrong, and if she's exonerated, I say, OK, I'm wrong. I think this jury... KING: You think the public expects her to...

TRUMP: Well, not the public. The jury. Right now, it doesn't matter what the public thinks. It matters what that jury thinks.

KING: Correct. 12 people.

TRUMP: And I think that jury of 12 people is saying, like, tell us you didn't do it. We don't want to hear from all the secretaries and everything else, many of whom were nullified and badly nullified. You have to get up on the stand. I know it's tough, she has to get up on the stand and she has to say, I didn't do it, I'm innocent. When she said, and her lawyer said, Martha Stewart is not going to testify, the whole jury went like this, as I read and rightfully so. I wish I could have been there.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARBARA WALTERS, ANCHOR, "20/20": I think what is happening to her, I do think that this woman, who has accomplished so much, this is such a difficult and heartbreaking, heartbreaking time, but if she had been a close personal friend, I would not have been able to do the interview with her, I would not have been able to say to her, as I did, Martha, why do so many people hate you? You can't say that to a friend.

(END VIDEO CLIP)

GRACE: Welcome back to LARRY KING LIVE. I'm Nancy Grace from Court TV in for Larry tonight. I want to thank you for being with us. A stunning decision handed down by a jury of 12 in a New York federal courtroom today. Martha Stewart found guilty on all counts, her co- defendant Bacanovic found guilty on four of five counts. They're looking at 20 years behind bars, each count carrying five years. Let me go to you Dominick Dunne, you have been spending time with Martha Stewart. You two are friends. You've had many lunches with her in the weeks and days leading up to the trial. What was her frame of mind?

DUNNE: I tell you, she didn't eat in the same place that the rest of us did. They had three offices upstairs, one for Martha, one for Peter Bacanovic and then an interim one. That's where they had lunch every day. I went up three or four times and had lunch with them there. I was always amazed how calm she was. The lawyers would be there, they'd be talking, then she'd go over and talk to her daughter. It was not a social thing, in any way, it wasn't like fun, but it was -- it was very quiet and she seemed very together to me all through it.

GRACE: Speaking of what went down in the courtroom, there was a series of high profile well wishers parading in and out of the courtroom, for instance Barbara Walters, of course, Bill Cosby, Brian Dennehy, even Rosie O'Donnell showed up to support Martha Stewart. Don't know, Henry Blodget, whether that helped or hurt. I understand Cosby never even took off his sunglasses, so much for star value. Did anybody recognize him?

BLODGET: He did not. Dominick would be the one who probably should comment on this.

DUNNE: They didn't recognize him, except for one juror. I could see that she was kind of confused that it was he. And whereas Rosie was there, up there, talking and gesturing...

ZELDIN: Badgering the prosecutors.

GRACE: I understand, tried to bribe the prosecutor with some M&Ms? Will they indict her for that? Let me go to you, Susan McDougal, I'm not saying Martha Stewart is innocent, I'm not saying she didn't dump the stocks and change the e-mail and change it back. This is what I want. I want lady justice to be blind, for everyone to be treated equally under the law. If she goes to jail, they all go to jail in her same situation. Otherwise, do you suspect that she was targeted because of her celebrity?

MCDOUGAL: I think when that juror came out -- targeted for prosecution because of her celebrity, you know, I kind of agree with the prosecutor, who's there with you. I think that she lied to them, and you don't do that. I think it gets to be a very personal thing. And they said, you know, she's not going to tell us the truth. We're going to get her.

I think it became between them a contest of who was going to win that thing. I think when the juror came out, though, after, is when I really lost -- I felt my stomach doing flips when he said this is a victory for the little guy. Martha Stewart was the little guy. She was very poor growing up. She worked hard. This is America. This is what we believe in, that you can work hard and make money and be somebody. For him to come out and say, you know, this is a victory for the little guy, I thought that was so very wrong. He just didn't get it.

GRACE: Dominick.

ZELDIN: I agree with that. I think, Nancy, that is a horrible thing for that juror to have said. This is, no matter what side of the criminal justice fence you sit on, defense or prosecution, this is a very sad day. No one can be happy with this. I expect the prosecutors aren't happy about this. Sure, it's nice to win but there's a lot of sadness around here. She's suffering, her family is suffering. It's a sad day. For someone to think that...

GRACE: But Michael Zeldin...

ZELDIN: Somehow this vindicated a little guy is off base and inappropriate.

GRACE: That this nature of the justice system. Nobody is jubilant, normally, when they leave the courtroom. There's nothing easy to swallow in any of these facts. Bringing down Martha, I would hope, was not the goal of the federal prosecutors, but I want to go back to something Susan Mcdougal said. Dominic Dunn, speaking of Martha Stewart, coming from nowhere, being a nobody, in a small town in New Jersey, and working her way to the top of a corporate empire, who is Martha?

DUNNE: Absolutely. She's the absolute American dream. She found a niche in American life that needed to be found. She brought this extraordinary taste at a cheap price to people that they have never had before. And she created an empire out of that. She's the hardest working woman I ever saw.

MCDOUGAL: Nancy, that juror was jubilant. You said there was no jubilance. There was. He was very happy and jubilant at his victory for the little guy. That's what really kind of made me sick. You know, Martha, come back with a very gracious remark. Instead we had whatever was read on television, I'll fight to the end. I wanted in juxtaposition to that guy holding his arm up and yelling we've got her, this is a victory for the little guy, for her to come back in a gracious way to say, this an awful day for my family and myself and there'll be another day. Something quiet and gracious. Martha, my advice is lead your life that way from this day forward because everyone's watch you.

ZAHN: The question is, in my mind, was she a target for federal prosecutors or is this simply justice being carried out and meted against someone regardless of their station in life, their bank account, their vanguard portfolio, is this about justice being blind or did federal prosecutors peek up under the blindfold and go, hey, a celebrity target.

PIXLEY: Absolutely. A celebrity target. Think about it, Nancy. You can convict 1,000 people in 2004 for these charges, obstruction of justice involving a small stock trade and not get all the attention you get for convicting Martha Stewart.

GRACE: I don't know, if she did it, she did it. There you have it.

PIXLEY: If she did it, she did it. And one of the problems with what we're hearing about this juror coming out and making a statement after the verdict was read is the fact that, you know, people think, OK, Martha Stewart's big, she's important. Her defense team actually played into that with their closing. But I don't want the jury to see her as something that's bigger than life.

GRACE: Hold that thought. I'm hearing in my ear I've got to go to break. We'll go to break with this interview. Take a listen to this byte.

(BEGIN VIDEO CLIP)

KING: Do you think beyond the trial?

STEWART: Absolutely.

KING: You do?

STEWART: Oh, absolutely.

KING: In?

STEWART: In all aspects of my life. I can't wait to get my life back.

KING: That's what I meant by, what do you do on getting your life back? Do you just go right on? Let's assume everything is great and you're acquitted. Now what?

STEWART: Nothing's -- nothing really has changed. The products we make are fantastic, the books we write are wonderful and informative. The products, the magazines are fantastic. All those people, in place, working so hard to keep our business as wonderful as it always has been, that is what's there.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

GRACE: Welcome back to LARRY KING LIVE. I'm Nancy Grace from Court TV in for Larry tonight. I want to thank you for being with us.

What a day. In an American courtroom, Martha Stewart convicted on all counts. Final thoughts, Chris Pixley?

PIXLEY: Well, just to finish, one thought. When a juror says this is a victory for the little guy, it reminds you that there is a real danger of bringing too much celebrity into the courtroom. I want jurors to see my defendants as one of them, because I want jurors to ask themselves the question, what if this was me, what if I was the defendant. I think in this case, if jurors had asked that question, they would realize that obstruction of justice charges in this circumstance are ridiculous.

GRACE: Michael Zeldin?

ZELDIN: Well, I agree that you have to make your client likable. And that that was failure in this case. I disagree that this obstruction of justice charge was ludicrous. And I think that the prosecution probably felt constrained to bring it under the circumstances in which it arose. I don't think they were happy to do that.

GRACE: And you say federal prosecutors were just doing their job. Susan McDougal, final thought?

MCDOUGAL: I think if she has one regret, it will be that she didn't testify. I lay many nights in jail thinking, why didn't I just get up there and tell those jurors who I was and what happened? And it was on advice of counsel. And I thought I was too -- I really thought I was unable to tell my story. And looking back on it, of anything in my life, I regret not standing before that jury, because it was better to have told them and lost than not to have spoken and lost.

GRACE: So your thought is Martha should have taken the stand?

MCDOUGAL: Absolutely. She's a fighter. She's well-spoken. She is earnest in her -- you know, when I've watched her on television. And I think she could have touched one heart on that jury.

GRACE: Wow. And Henry Blodget, you've been in the courtroom from the get-go for "Slate" magazine. Final thoughts?

BLODGET: Well, we've talked a lot about why the government has done this, whether it helped them, whether it was selective. All I can say is from watching in the courtroom, the prosecutors who tried this case did a wonderful job. And they were completely straightforward and disarming. And I think that that's one thing we haven't brought up. I think that's one of the reasons Martha Stewart was convicted. And certainly there didn't seem to be any ulterior motive.

GRACE: Well, that's very important, because many people have been saying Martha Stewart has been a celebrity client. You're saying otherwise.

BLODGET: They did play the card that we talked about earlier, which is the a secret tip to the rich person and so forth, but aside from that, they really clearly believed in what they were doing, and that obviously I think washed under the jury.

GRACE: And finally, Dominick Dunne.

DUNNE: And finally, Dominick Dunne. Well, you know, I agree with Susan. I wish she had taken the stand. I think she could have absolutely charmed that jury, totally and completely.

GRACE: What a day in a New York courtroom. Martha Stewart found guilty on all counts. She is looking at multiple years behind bars. That sentencing going down in June. Her co-defendant, Bacanovic, also found guilty.

I'm Nancy Grace from Court TV, in for Larry King tonight, and I want to thank you for being with us this evening and inviting us into your home. Sunday evening, Larry will play the entire interview with Martha Stewart, so stay tuned for that. Again, thank you for being with us, and stay tuned for Wolf Blitzer, he's in for Aaron Brown. Good night.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com