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CNN Larry King Live

Martha Stewart Released From Prison

Aired March 04, 2005 - 00:00   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, HOST: This is a live shot of Alderson Federal Women's Prison, Alderson, West Virginia. Martha Stewart is about to walk out after five months behind bars.
We've got a panel full of guests, but first let's go straight to CNN's Kareen Wynter. She's there on the scene.

Hi, Kareen. What's the latest?

KAREEN WYNTER, CNN CORRESPONDENT: Well, there's quite a flurry of activity out here, outside of Alderson facility, which is about a mile down the road to the (UNINTELLIGIBLE) in the area, the flashes here (UNINTELLIGIBLE).

We're awaiting Martha Stewart's arrival, coming out of prison after serving her five-month prison sentence. Now, I can tell you behind me here...

GRACE: Kareen, hold on just a moment. We've got to get your audio fixed. Everybody, welcome to LARRY KING LIVE, special live edition tonight. You are looking at Alderson Women's Correctional Facility, also known as, a.k.a Camp Cupcake.

Martha Stewart has been behind bars, as we all know now, for about five months. She's headed now toward home imprisonment, house detention. It will be quite a switch. Welcome to LARRY KING LIVE. Again, I'm Nancy Grace.

Let's go to our panel until we get re-hooked back up with Kareen Wynter, CNN reporter right there at the gates of Alderson. We're waiting to see Martha Stewart released. It's caused quite a stir.

First, let me go to Jean Casarez from Court TV. Jean, she's headed from behind bars to home detention. Now, how does that work? Where will she be fitted with her monitoring bracelet?

JEAN CASAREZ, COURT TV CORRESPONDENT: Right. Well, she will not have it on when she leaves the prison tonight. She's got 72 hours, and in those 72 hours, she goes to a probation facility, meets with the probation officer, gets fitted with the bracelet that will go around her ankle, by the way.

So then probation has to come out to the house, because the transmitter, the monitoring system, has to be hooked up with a phone line at her home, a direct phone line to the Bureau of Prisons.

GRACE: Now, does she go in and around the house?

CASAREZ: That was the question I asked. The federal system does not allow it. You know, normally in state systems, maybe 200 feet beyond your home you can go. She can't go outside of the house.

So the -- the spring garden?

GRACE: Yes.

CASAREZ: I don't think she's going to be able to do it.

GRACE: Also with us is Henry Blodget. He is a contributor to "Slate" magazine. He's actually been in the boardroom with Martha Stewart. We've got our eye peeled on Alderson Ladies' Prison. We have a reporter there live. We can't hear a word she's saying right now, but we can see. And I am waiting to see Martha Stewart come through those gates.

Henry Blodget, what do you make of it all?

HENRY BLODGET, CONTRIBUTOR, SLATE MAGAZINE: Well, we're sitting here glued to the monitors. It's a remarkably dramatic moment. But it will be interesting to see when she comes out. She's supposedly going to speak at the airport, which would be very interesting to hear what she has to say there and then obviously, in the next few days.

GRACE: You know, Henry, what's interesting is what Martha Stewart did, and there's no doubt that she did it, it did not take money out of anybody else's pocket. No one else was harmed because of the stock. The stock was spiraling downward because Erbitux had been rejected by the FDA.

At the time, her trade had no effect on anybody else. No regular people like us were harmed. And I think the story's caused a lot of resentment, because she went to trial while other corporate leaders that were like pigs at the trough walked free.

So this is a sort of a triumph for her.

BLODGET: I think it's obviously been a personal disaster for her in some ways.

GRACE: I mean today.

BLODGET: Coming out, absolutely. And I think it will help people certainly forgive her and look to this as a big comeback, rather than to the fact that she should still suffer.

GRACE: Again, we are posted outside Alderson Ladies' Correctional Facility, waiting for Martha Stewart to emerge.

Now actually, her release date, Keith Naughton -- Keith Naughton is with us from "Newsweek" -- I believe was supposed to be over the weekend. They don't release over the weekend, so she's getting a couple of bonus days. KEITH NAUGHTON, "NEWSWEEK": Yes, she's getting out early. She's getting an early release, two days before her official release date. And you know, when you think about it, it's amazing the transformative powers of incarceration. Because she went into prison under the dark of night. None of us were there. There were no cameras. She slipped in without us seeing. And at the time, she was the villain.

Now she emerges from prison in the light before these banks of cameras. And she's a hero. She's a folk hero.

GRACE: I'm going to go out on a limb again and try to go to Kareen Wynter, our CNN reporter there at Alderson.

Kareen, I thought for a moment they dragged you inside. Tell me the latest.

WYNTER: Well, the latest is a lot of buzz out here, awaiting Stewart's arrival. We're right outside of the facility.

Nancy, I have to tell you, in the last several minutes, there's just been incredible activity, vehicles coming in and out of Alderson.

Now, what you're looking at is the route that Stewart is expected to take as she gets her first taste of freedom, as she drives out. The clock has struck midnight, which means that any time now she could be walking out of here.

And I can also say there are many supporters out here waiting with the media in the cold, supporters from SaveMartha.com. They're from Seattle. They have their signs. They have their cameras.

Quite an exciting time, but really what we're waiting is to see if Stewart will be making her way out here any second now -- Nancy.

GRACE: Also joining us is Susan McDougal. She's the author of "The Woman Who Wouldn't Talk." You remember her from Whitewater. Susan did time behind bars after a lengthy and multi-million dollar investigation by the federal government.

Susan, what do you expect Martha is going to do day one from behind bars?

SUSAN MCDOUGAL, WHITEWATER CONVICT: You know, I was just wondering if tilling the garden and cultivating it would be part of that 49-hour work week. Because I think she could argue that. And still do the garden. Because she does get to work outside the home for awhile and I can see her arguing that and actually getting the garden in.

GRACE: You know what? I have a different fantasy. I would definitely go for a big stack of pancakes at Denny's.

So what was the first thing you did when you got out, Susan?

MCDOUGAL: You know, I invited everyone who was watching television to come to a party in Little Rock, Arkansas. And a lot of the world came that night. Everyone -- I just said, "Please, everyone come and say hello. You know we're going to be at the Capitol Hotel all night long. And people came from all over that night to -- to welcome me.

GRACE: So you partied hardy. Somehow, Kareen Wynter, I don't see Martha as having a party tonight. Also, let me clear up, you're telling me fans are out there in the cold, waiting for Martha Stewart to come out.

WYNTER: It's an incredible site. They have their cameras. They have their little notepads already, maybe wanting to capture the moment, perhaps keep it as a journal.

They were out here earlier today, as well, Nancy. Just monitoring things, knowing that it would be hours until perhaps you would see Stewart. But there's some very, very loyal fans out here. I should also add -- I don't know if you caught this off the top -- but under choppers above us.

It's quite a scene out here, Nancy. There are crews for left and right but another big staging area is just, perhaps about half a mile -- half -- an hour away from here, rather. We'll be at that airport, where Martha will be boarding that plane. So that will be also another site where a lot of fans are expected to descend.

GRACE: At the Greenbrier Valley airport there in West Virginia is CNN correspondent Deborah Feyerick.

Hi, Deborah.

DEBORAH FEYERICK, CNN CORRESPONDENT: Hey, Nancy. Well, Martha Stewart's plane landed about 11:30 this evening, a small private plane taxied down the runway and went into a hangar. It is now standing by, waiting for Martha Stewart. We were told by the airport manager that that plane is going to be ready to go as of 12:01. That is the earliest that Martha Stewart can be released. She's not going to be spending an extra second in that prison.

She's going to be handing in her prison khakis, closing out her commissary account, and then changing into clothes so she can join her caravan and get to the airport. It's about a 45-minute ride from Greenbrier. I'm sorry. From Alderson here to Greenbrier Valley Airport. A lot of chase crews, actually, waiting outside the prison. They're going to see if they can get pictures of her en route.

But interesting, Nancy, she came under the cover of darkness.

GRACE: This is crazy.

FEYERICK: She was -- it's totally crazy, and there are about 10 of them that are waiting to get a picture of her in front of Alderson Prison. When she arrived, there were no pictures at all, even though everybody was standing by. As a matter of fact, she slipped in just before 6 in the morning.

People were actually running, taking tapes out of their cameras to see whether in fact they may have captured her on film. Most people simply missed her when she slipped in.

Now she's coming out, but here's the interesting thing. All those same cameras are waiting in position. Will they get a shot of her next to Alderson Prison? She didn't want it going in. We don't know whether she's going to want to get -- want it going out.

What she is going to watch is a picture of her here, walking towards that private jet, just like "Casablanca," through the darkness to the private jet, taking it to her future. Her company actually brought in a flatbed truck and mounted cameras on top of that flatbed truck.

And I don't know if we can sort of pan off just now. We hadn't planned for it. But there's an entire flatbed truck. And Nancy, there was actually a smaller truck. When they realized how many people are going to be standing on top of that, they brought in a larger vehicle.

GRACE: Hysterical.

FEYERICK: And again -- that's right, and Martha Stewart, she's going to be leaving. And she's going to be leaving in victory. We're here waiting for -- to see a smile, to see a wave, to see some sort of acknowledgment that she's heading off to a very bright future.

She's not going to make a statement, we're told. What she is going to do is once she's on that plane, go to her web site. Because there's going to be some sort of a statement on that web site, saying that she's out -- Nancy.

GRACE: Deborah Feyerick is standing by at the airport. Everything's ready for Martha to take off. Kareen Wynter, standing by at Alderson and guys, did you just see some guy sneak around?

UNIDENTIFIED MALE: Like a moonwalk.

GRACE: And he snuck around the back. Why is everybody so crazy about Martha getting out of jail?

BLODGET: She's a classic American story, and I think, certainly, she was the epitome of the 1990s. And then symbolically was the epitome of sort of the corporate crash and greed and so -forth.

GRACE: Well, I've got a confession. I'm going to confess right now she gave me a subscription to "Martha Stewart Living," OK? And I read it. I read it.

BLODGET: It's a good magazine.

GRACE: I might do one day when I have enough time. It's like a fantasy, right?

CASAREZ: It is, it is. I gave it to you a couple years ago because I know you love to cook. And so do I. And so I've made her a believer now. GRACE: Here's the thing. You know, the reality is I think most people, most lawyers believe that yes, she did the trade. There's no doubt about that. But still, what you're saying is true, she's almost attained some type of a hero status. Now, how has that happened?

BLODGET: Well, it -- it's come because she finally showed some repentance. By going to jail voluntarily, instead of -- instead of fighting her appeal and staying out of jail, she showed some act of contrition. And she's benefiting from that now.

And plus, when she was inside she befriended the roommates. She didn't keep her distance. She embraced them. She became friends, taught them how to cook better in the microwave, taught them how to start their own business, and in return, they protected her from paparazzi. So she became friends with her fellow cons, and that makes her more human.

WALLACE: Again, we have our eyes pealed on Alderson Women's Correctional Facility. This is a live shot, and we're waiting for Martha Stewart to finally break out on the big house. She's been behind bars five months.

Now she's got not only house arrest, Jean Casarez, but she's also going to be under supervision for how long?

CASAREZ: Nineteen months after that. So 19 plus five is 24. You've got two years now that she's either going to be under that house arrest or supervised probation. And that means a lot of things. A probation official can go to the house at any moment of time for the next two years to see what she's doing.

She can do at least 48 hours...

GRACE: To see what? A totally meticulous house?

CASAREZ: Probably.

GRACE: A garden in the back yard?

CASAREZ: Probably.

GRACE: What? Weaving her own rug?

CASAREZ: Yes. But the fact is, your privacy can be violated, you would think, any time that the probation office wants to do that. So that's part of all of this. But she can leave for 48 hours a week, not only for work but for medical, for dental appointments, for church activities. And also to go to the market to buy groceries.

GRACE: What about out of state trips?

CASAREZ: Do you know what? She can be traveling out of state, because if you look...

GRACE: So if you can't leave your house but you can leave the state? CASAREZ: If it's a business purpose. If it's work related. But now remember, probation office would have to OK all of this well in advance, which is not something (ph). Because this is a house arrest situation. It's not complete freedom.

But there is a chance that she could fly out of state, but that might be her big trip of the week, because 48 hours, that's all she can leave.

WYNTER: It's -- actually, feels like it's in the teens out here, Nancy. It's -- there's a lot of snow on the ground. We're all dressed quite comfortably for the weather in our boots and our jackets.

But the air out here is quite electric. Five months of imprisonment has come down to basically a matter of minutes, perhaps, that we could see Stewart surface from behind these walls here.

So it's quite a fitting moment, a big moment for her. And fans don't seem to mind. We heard the prison guards, prison officials behind us actually yell out, asking people to clear out of the road for safety reasons. There are a lot of vehicles coming in and out. It's quite dark out here. They don't want anyone getting hurt in the process, but just to set the stage on what exactly is unfolding out here.

GRACE: Keith Naughton is with us from "Newsweek." How has prison changed her? Now, was it "Newsweek" that had her picture on the front, with her head and somebody else's body.

NAUGHTON: That's us, yes. That was us.

It was a photo illustration. The idea was that it was supposed to be humorous. People were supposed to recognize that Martha is in prison...

CASAREZ: I thought it was her.

NAUGHTON: She probably wasn't available for a cover shot for us. But you know, if it was too close to reality, and it fooled some people, well, that's not what we had intended.

GRACE: So tell me how -- how you believe prison has changed her.

NAUGHTON: Well, I think that what it has done is it has humanized her. It has -- it has made her seem more like one of us, more down to earth. So it sort of chipped away at that kind of ice queen image she had.

Now the question is, can she maintain that when she comes out, or will she return to the Martha of old? That will determine whether her comeback succeeds or fails.

CASAREZ: We all heard about the possibility of future plans.

GRACE: I'm talking a reality show, a book, you name it. What do you know?

NAUGHTON: Well, she's got the two shows coming. She has "The Apprentice" with Burnett, marketing.

GRACE: How big is that?

NAUGHTON: It is going to be just like Trump's "Apprentice," except difference. It's going to be the Martha version of "The Apprentice." We won't be in a boardroom, but we don't know where she'll fire people. But she will fire people. But she won't say, "You're fired."

So they're waiting for Martha to come out to say exactly how she's going to get rid of her...

GRACE: She'll probably give them a pink engraved pink slip.

NAUGHTON: Right. She could. She could give them a cake and tell them when to eat it.

GRACE: OK, she's got the reality show.

NAUGHTON: Yes. And then she has a daytime show that also will be different than the old sort of sterile one. It will be live in front of a live audience.

GRACE: I didn't think it was sterile.

NAUGHTON: Well...

CASAREZ: I didn't either.

NAUGHTON: Mark Burnett did, and he thought the lighting made her look cold, which only reinforced the bad imagery. So in any event, it will be live and she'll -- she'll -- if flubs happen, that's OK. It's supposed to be funny. It's spontaneous. She'll have celebrity guests. It will be for an hour.

And already 85 percent of the country has bought it, and it's not even on until September. All top 20 markets have already bought it.

GRACE: So what about a book?

NAUGHTON: Well, there is a rumor that she's thinking about doing something on her prison experience.

GRACE: Well, I read where Dominick Dunne wrote that she had a multimillion-dollar deal on a book. True or false?

NAUGHTON: I don't know. But it sounds like a good deal to me. It sounds like she could easily get that deal, because everybody wants to know about Martha's life inside.

GRACE: Susan McDougal is with us. Susan did time behind bars on civil contempt charges regarding Whitewater. Susan, do you remember the moment you got out of jail? MCDOUGAL: Yes, I do. I vividly do. In fact, my stomach's full of butterflies for her. I was released out of the courtroom in my orange. The judge said to walk out of the courtroom, actually.

And so I walked out. I had no clothes or anything. The cameras were out there, you know, all of the satellite trucks. There were a lot of people who cared about what had happened to me and had followed my story out there and waiting for me and cheering and it was surreal. It was -- I couldn't even take it all in.

I remember thinking, you know, the sun was shining and I was outside for the first time in a long time. And it was a really surreal moment.

GRACE: Deborah Feyerick, I think a lot of people had hoped she would make a statement at the airport. Why not?

FEYERICK: This whole thing has been so carefully orchestrated, Nancy, that it's unclear why she decided not to. As a matter of fact, there has been some speculation that perhaps while she -- when she left Alderson, she might actually come to the prison gates and make some sort of statement before getting into a van and driving off.

That changed, and now we're really just going to be able to see her here boarding that plane. We're told that, you know, she'll have some of her belongings in the van with her, so she'll probably be wearing a coat, because it is cold, as you mentioned. And then she'll go off.

And you know, talk about softening her image, as well. She wrote a very powerful letter over the holidays, talking about prison reform and saying how Americans should really get on the bandwagon and speak out against mandatory sentences. Of course, the judges ruled that they weren't right, that there should not be a mandatory sentence.

But the fact that she's now possibly speaking out as a prison reformer, we'll see how long that lasts when she does go back to her empire and begins putting that part of her life behind her.

GRACE: Susan McDougal, do you believe that she will try to help inmates when she gets out?

MCDOUGAL: You know, that's the most interesting part of this whole story to me. I'm really not interested in a lot of the other things, but it's going to be interesting to me to see is she a better person? Is she a humbler person? Did she learn some lessons from the women in there?

And believe me, they have a lot to teach you. They've been through a lot in life, and they've survived it. Which I always thought was an amazing thing, when you hear their stories.

And you king of find out very quickly that you're not the center of the world. And I think for Martha Stewart, she's been the center of her world for a very long time. And I'm interested to see, you know, will she be a kinder, gentler person who cares about other people? I think money was her downfall and maybe the love of money was her downfall.

And I'm -- I'm really interested to see if people become a very big part of her life. They say her daughter and she have gotten very close during this, and I found that was true for myself. And I want to see, does she keep up those relationships? Can she forge a relationship with a man? Will she marry? Will she be gentle enough and have enough love in her heart to have relationships with people and not just with things and money and clean surfaces?

And I -- I think I'm going to tune in, just to see will that last? Because it's very easy when you get out of jail to revert to form, to become the same person who's running through life as fast as you can run. And you have to almost sit down and say don't forget how you felt when you were locked up so that you can be that person.

GRACE: Susan, is that how it affected you?

MCDOUGAL: I'm a better person. I'm a much better person today than the person who went to jail. I went in angry and bitter, and there were nights I couldn't sleep with the anger I had in my heart. I had lost any relationship that I had with God and with my fellow man, because I was an innocent person, and I was so angry.

And the women in there taught me, through the stories of their lives, through the things they had been through, that you can survive anything and you can be a better person for it. I love all of the women that I met. There aren't any that I couldn't say could teach me something, because they had been through things that you read about in books but you don't believe really happen to children and to young people. And I am a better person for it.

And I know I'm a humbler person for it. And I think I'm more connected to people. And I pray that she got that lesson in the five months she was there. And I'm waiting to see. I'm going to tune into her shows, and I'm going to watch her life. And I'm going to see if that's true.

Because she could do so much good. This could have an affect that would -- it would change people's lives forever. If they change mandatory minimums, I can't tell you the number of people who could go home.

GRACE: You know, Henry Blodget, what she is saying is -- is very profound, actually. And you have had dealings with Stewart. Do you think that this metamorphosis could happen for her?

BLODGET: I think it's an incredibly important point. And if you really -- if you look back at Martha Stewart, obviously she's taken a lot of crap, a lot of petty stuff that's thrown at her because she's a woman and a CEO and so forth. But one of the things...

GRACE: And she did make the trade.

BLODGET: That's right. But one of the things that did seem to be true coming out of the trial is that she, in many cases, did not treat the people who work with her very well. And you know, again and again you'd hear that and how impatient she was and how angry she could get and so forth.

And so to the extent that this is an opportunity to step back and say, "Look, I have done this incredible thing with my life, but there's one thing missing for me to actually become a really inspirational person, not just business leader." That would certainly be it, what Susan's talking about.

And I'd like to see that. I've never seen that. Martha's always been incredibly charming when I've seen her. But just you hear again and again these stories. And it will be very interesting to see whether that's changed.

GRACE: OK. We're seeing some movement there at Alderson. Let's go straight out to Kareen Wynter. Kareen Wynter, what's going on?

WYNTER: Well, the prison captain just walked out, Nancy. You can pan over a little bit to my right. We're constricted with all the crews out here. But he's clearing away the people that have lined up on the hill to my right.

Now this is where Martha Stewart is expected to be driving out. There's a lot taking place behind it just a few seconds ago. We're told that prison guards got into action. Some came out of their car. Others went in. They were flashing their lights, perhaps to signal that they would be taking Martha out or leaving her out of prison. But we're standing by and waiting to see right now -- Nancy.

GRACE: Jean Casarez, it's not over yet. There's still the specter of the SEC.

CASAREZ: You're right. That's the reality. Her legal troubles aren't over yet. First of all, the appeal is going forward. But also the SEC. It's a civil action. It basically involves money, so a lot of people say, "Look, what's the big deal? It's not prison time, it's money."

But it involves something extremely important to Martha Stewart. The SEC is asking that she forever be barred from being a director or entertaining officer duties with her company. And you know, this is critical to Martha Stewart.

So it is believed settlement talks are going on, and instead of a lifetime bar, she would probably want something short of that. Now, I understand the SEC does not allow less than five years of disbarment from being a director or an officer. But maybe something could be worked out that in five years she could do that.

GRACE: Keith, back to your "Newsweek" story. Incredible story. Now that you've listened to Henry and Jean and Susan discussing it, what changes do you really expect in Martha Stewart?

NAUGHTON: Well, you know what? She needs to change. It is -- she needs to take the ability. She needs to be directed. She needs to have somebody else -- she needs to become a subordinate. She needs to be stayed...

GRACE: Why?

NAUGHTON: Well, because this high-powered team of, you know, Hollywood and New York A-listers have come together to stage manage her comeback. And if she fights them instead of going with it, it will be a disaster. It will just be a fight.

She has to learn how to take direction from these very good people who have some very good ideas about how to bring her back. And if she doesn't, one of the stations who bought her show said if she has one idea and Mark Burnett has another idea, well, that's just a recipe for failure. They need to be on the same page.

MCDOUGAL: I -- I hate to disagree with that, but one of the best things about jail and prison that I found out is to be yourself and to fight anyone who tries to make you anything else. And to be as real and honest and truthful about who you are and about the feelings you have and that you will never go wrong doing that.

And I would tell her if they try to make you into something else, stand your ground and be the best person you know how to be and show that to everyone in America, and they will love you. And they will come to you.

And if Mark Burnett wants to make her into something that she isn't, she needs to fight it.

GRACE: You know, Susan, I don't think that Martha Stewart can be made into something other than what she is. Is that what you're suggesting?

NAUGHTON: No, it's not. What Mark Burnett said is the woman he came to know is very funny and witty and spontaneous. And none of that ever comes through in her -- in her old show.

GRACE: No. I agree.

NAUGHTON: What he wants to see is the humorous Martha come through that maybe people caught a glimpse of on Letterman or other shows that she would be on but never on her own show. So that's what he wants, the spontaneity, sort of fun loving personality that never comes out.

GRACE: Henry, how has this affected her financially?

BLODGET: Well, fortunately she had quite a bit to begin with, even with the stocks...

GRACE: Yes.

BLODGET: ... getting crushed. But since she's been in prison, and everyone's started to look forward to her coming out...

GRACE: I don't know how you could say jail is a good career move, but apparently, that's what people are saying.

BLODGET: Well, people in the stock market certainly have been looking forward to the release. And the stock has anticipated that.

GRACE: Jean?

CASAREZ: I think America is opening its arms to Martha Stewart right now, but I agree with you completely that if -- if the arrogance comes out when she comes out of prison, instead of talking about the experience or maybe having someone that she was in there with on her show to help that person in life. I think America will grasp onto that and move forward with her.

GRACE: You know, we still have our eye peeled on the Alderson Correctional Facility. I'm getting word in my ear we think Stewart is about to emerge.

Now, as Kareen Wynter told us earlier, there are actually chase crews that are going to try and chase Martha Stewart to get a photo of her. How much do you think that photo would cost, Keith, of Martha Stewart, you know, posed or caught posed beside the Alderson Correctional Facility sign?

NAUGHTON: There have been so many horrible photos of Martha Stewart taken in the last three years, you know, running from the paparazzi. I think what her people are trying to do is stage manage a triumphant moment here. That's why they have the flat bed truck out there. They're trying to get the reverse version of the old Nixon waving at the helicopter shot.

GRACE: Oh, yes.

NAUGHTON: They want her to be raising her arms in triumph and showing that she is back, as she had promised.

GRACE: Let's go to Deanne Stein with WOWK. Deanne, what can you tell us?

I think I've got Deanne with me. Deanne, are you there?

DEANNE STEIN, WOWK REPORTER: Yes.

GRACE: Hi, Deanne. What can you tell us? What's happening there at Alderson?

STEIN: Well, we're still watching and waiting, basically. We have, you know, the local news affiliates here as far as network and we're all just, you know, shooting every car that comes out of those gates, basically, hoping, you know, that it will be her.

GRACE: Deanne, is there a way she could have already left and gotten by everyone?

STEIN: Well, you know, there is a back way into the prison, and we have at times gone back and forth, you know, debating over should we be at this back gate? Should we stay at the front gate?

Really there's no way to know at this point, you know. And I know when she came in five months ago, they didn't let us know until she was actually in there. I'd say that's going to be the case here unless we actually get a visual of her leaving.

GRACE: We've got our eyes trained on Alderson Women's Correctional Facility, a.k.a, also known as, Camp Cupcake. Where did it get that name, Henry?

BLODGET: You got me. But I -- I will...

GRACE: There's somebody official. And he's walking along as if he means business. He's ordering everybody out of the way. Go ahead, Henry.

BLODGET: Going back to the -- what Keith is talking about, Mark Burnett trying to bring out some of Martha's humor and so forth. You alluded earlier to my being in the boardroom with her. I was in a very tense corporate situation. A big deal was being discussed.

And it was very odd, because this was actually -- Martha sitting next to me would one second be talking about this transaction, the importance to the company and so forth. And she'd look at me and say, "Are you married? We have to marry you off." And you know, these people we're going to do it with and so forth.

So obviously, that spontaneity is there, and I think if you can capture that in an "Apprentice" situation, it would be great for her.

GRACE: Deanne, do you think -- OK, what is happening right now? Are they releasing a statement?

KLEIN: It looks like this is a press release. I know five months ago when she went in, as soon as she did arrive into the facility, this is what they did. The federal, you know, people came out. They gave the press release to all the media.

Actually, I'm not there. I don't know what they're actually releasing at this point. But I'm assuming that's probably what they're releasing.

GRACE: Deborah Feyerick, Deborah Feyerick, how would it benefit her not to be photographed leaving Alderson?

FEYERICK: Well, it's very interesting. That's not exactly the image that she wants remembered. What she really wants is an image that... * GRACE: Deborah Feyerick, how would it benefit her not to be photographed leaving Alderson?

FEYERICK: Well, it's very interesting. That's not exactly the image that she wants remembered. What she really wants is an image that shows that she's been empowered, that she's going off to begin the next stage of her career.

And of the last month it has been so carefully managed. The new CEO of her company has been talking, putting a public face on this imprisonment. The editor of "Martha Stewart Living" magazine came out with a very friendly editorial saying, you know, "We now have a whole section on Martha and how she's getting out."

GRACE: We see a car leaving. I'm just wondering is that Martha Stewart?

FEYERICK: You know, Nancy, that's what's so interesting.

GRACE: Don't know yet everybody. We are waiting for Stewart to leave. Go ahead, Deborah.

FEYERICK: Well, what we saw happening is we saw a number of cars that were going out or coming in actually when she first arrived. I'm sorry. When we were there this evening, we saw a number of cars and they almost looked like they were doing a dry run around that area. We couldn't quite figure out exactly what it was they were doing.

As you can see, all of these cars pretty much similar models. We don't know whether, in fact, the reason they're doing that is because there are chase crews out there hoping to follow Martha Stewart to get some sort of a picture.

Again, the point that you raised earlier she really doesn't want to be photographed at Alderson Prison. She wants to be photographed here. This way she can put that part of her life behind her and what we're waiting to do is try to get some details of what exactly the statement has contained.

But that's exactly what she did when she entered prison, the moment she entered that prison that captain walked out with a statement and her Web site went on -- Nancy.

GRACE: Let me announce Martha Stewart has been released. Stewart has been released from Alderson Women's Correctional Facility. I assume, Deborah, she's on her way to the airport right now and what will take place there?

FEYERICK: Well, what will take place? First of all, it's about a 30-minute ride and it's a very, very dark road that she has to travel on. It's about ten miles before she actually gets onto the highway and there are deer out there. There are pheasant. There are a lot of animals along that road, so she's going to have to go carefully.

Then once she gets here to the airport they're going to bring out the private jet, which is now inside that hangar. The statement said that at 12:30 is when she left that prison, so that's obviously just moments ago, likely she may have been in one of those two blue cars.

There are back routes that can take her from the prison here to Greenbrier Airport but, again, the plane will be brought out. It's not a large plane but it is a very sleek private jet and we're not quite sure exactly who she is with right now but there's a lot of activity here.

And, Nancy, why don't we just give you a quick look-see as to what's going on here because, again, just so you can feel some of the excitement that's happening here. People know she's now going to be arriving at the airport. You've got still cameras on that flatbed truck that was rented by her company. You have an advance man on the ground making sure that everything is running smoothly. You have still photographers.

This is the kind of press that you see at any celebrity event. This is the kind of press that you see when you cover fashion shows. That's the kind of deal we're talking about.

This is not the Martha Stewart who went in, whose name was shrunk on her very own magazine. This is a Martha Stewart who has been brought back into the fold of her company and even the editorial that was written in the magazine, you know, talking about Martha, Martha, Martha.

When the statement goes up on the Web site it's not going to be on her private Web site, marthatalks.com, which is what happened when she went in. It's going to be on the company Web site. So, again, a really fundamental shift in terms of how Martha Stewart is being packaged at this moment in her life and in her company's history -- Nancy.

GRACE: Keith, is there any way that she can be CEO of her company?

NAUGHTON: Yes. She's trying to cut a deal right now, in fact, with the SEC to limit this ban on being an officer or director to five years or less and then she can return as the CEO.

And, you know, her mother is still very lively into her 90s, so Martha at 63 is probably really only at middle age. So, there are plenty of years ahead for her to be CEO.

The question would be though she recruited Susan Lyne (ph) to the company, Susan Lyne who was the ABC executive who green lighted "Desperate Housewives," how delicious is that? And since Martha is the original desperate housewife and so could she really recruit somebody that high power and then shove her out of the way?

GRACE: Now, why do you say Martha was a desperate housewife?

NAUGHTON: Well, she was. She was living...

GRACE: She was the head of one of the biggest companies in the world, hello.

NAUGHTON: How did it being? As a caterer in Westport she was -- she was in that house and she felt desperate. She wanted to get out and do something bigger and she did and here we are today.

GRACE: Jean, why do you believe that Martha Stewart is such a polarizing figure? People either think she should stay in jail or they think she was persecuted, why?

CASAREZ: You know, I think it has to do partially with the dichotomy of her being just such a homemaker but then a tyrant and then a homemaker that goes to prison but I think you love her or you hate her and I think there's no two ways about it. But I think it comes down to the fantasy, Nancy, that you mentioned before is the fantasy that we all would like to be this perfect person.

And when you talk about "Desperate Housewives," you're talking about Brie (ph), the character Brie because I think that was patterned after Martha Stewart, right?

NAUGHTON: Yes, it was absolutely (UNINTELLIGIBLE).

GRACE: What do you think Henry, why so polarizing?

BLODGET: I think it's what was just discussed but I think also Martha has always played many different roles. She's been CEO. She's been the talent on the TV show. She's been this inspirational housewife figure or what have you, homemaker figure. And it's very hard to do any of those roles in isolation very well.

GRACE: Even just one of them.

BLODGET: And she's doing them all at the same time and it's so easy for people to criticize one aspect of that and confuse them and she's also been the brand of the company.

GRACE: Let's quickly go to Kareen Wynter. Kareen, was that a statement issued?

WYNTER: There was indeed, Nancy. At 12:30 a.m. Martha Stewart was officially released from Alderson having served her five month sentence. Let me read a little bit of what we have here in addition to what I just told you.

It says that she was actually sentenced in the Southern District of New York to a five month imprisonment for obstruction of justice. It just goes on to say that she will also be sentenced to a two-year term of supervised release, five months of which will be served in home confinement.

Again, at 12:30 a.m. Martha Stewart officially released from Alderson here. I can tell you that the prison guard out here, he had a smile on his face, the prison captain. He shook a few hands.

We saw a flurry of cars, a lot of activity go by. The lights are going off Nancy. It's been very, very difficult. We'll be pinpointing which vehicle she may be traveling in because it's moving in so quickly, some of the windows tinted but we do know now that she is a free woman.

GRACE: So, Kareen, she was in one of those vehicles we saw come out?

WYNTER: We believe so. It's very, very tricky. That's what we're hearing. We're waiting on official confirmation that she did indeed leave this route and it's incredible. It's actually hard to believe that she wouldn't because this is really the only exit out of here.

There's another exit but it's been closed off because of the snow. So, one of those vehicles perhaps Martha Stewart actually made her way out of here a few moments ago.

GRACE: OK, quick break everybody. We have been at Alderson waiting for Martha Stewart to be released tonight. She was supposed to be released at 12:01. She left the facility at 12:30. She is en route to Greenbrier Valley Airport in Lewisburg, West Virginia where we're all standing by waiting to see Martha Stewart take off for her new life. Stay with us.

(COMMERCIAL BREAK)

GRACE: Welcome back to LARRY KING LIVE.

We've got our eyes trained right here on Alderson Ladies Correctional Facility. Martha Stewart just released about ten minutes ago having served five months behind bars.

She's now headed to the local airport at Lewisburg, West Virginia where many people hope that she will give a statement. Then she will jet off on a private plane. We're waiting to see her.

Here in the studio with me, Keith Naughton from "NewsWeek." Keith, what preparations were made for her release?

NAUGHTON: Well, you know, the thing is she didn't want us to see her in those blue SUVs that sped out of the prison because reportedly she's had her hair stylist flown in.

Her daughter has been out at Bergdorf Goodman buying her new outfits because she's in a much smaller size now because she lost weight in prison. So, she wants to reemerge fully coiffed. She wants to put best face forward. She doesn't want to come out in her prison grays.

GRACE: How is she going to do that in the back of a car Jean?

CASAREZ: We may not see her tonight. We may not see her board that plane. If so, it will be a distant shot with maybe a head covering on her or something. She wants to look her best when she's before cameras.

GRACE: Well do you blame her?

CASAREZ: No.

GRACE: So, Henry, question to you if she wanted to could she head her organization?

BLODGET: I think my understanding now is that she is not -- she could still be CEO tomorrow. The SEC, the civil suit with the SEC, something the SEC could seek to bar her and I guess the question is she's in settlement talks perhaps to try to settle it and to try to get the SEC to agree to a shorter period of five years. CASAREZ: But, Nancy, let's take that a step farther. Let's say tomorrow she does a press conference and says "I am going to reclaim my title as CEO or director or as an officer," the SEC is going to be listening because they don't want that and they could jump to remove that stay and proceed with that civil action. So, I think she needs to be very careful.

GRACE: But do you think they will?

CASAREZ: I think they could.

GRACE: I mean the woman has already done jail time.

CASAREZ: True.

GRACE: I mean why beat a dead horse?

CASAREZ: But because you still have that legal matter and the SEC believes it's an important legal issue yet to be resolved, so I don't think they would like her and they would think it's the arrogance coming forward again.

NAUGHTON: The SEC sees an opportunity here to broaden the definition of insider trading with Martha Stewart's case, so she didn't get a tip directly from an executive. She got it from a stockbroker's assistant.

That's never been considered insider trading before. If they can get her to accept a deal on that, then they've just broadened the definition and they have greater power to police insider trading.

BLODGET: And that's much easier for them. I mean I don't think based on the people that I've talked to that it's such a lay up for the SEC to actually prove it, so they would like to see her settle and set the precedent that way.

GRACE: Look, having been a fed it takes them forever to move on anything so Stewart could probably do a somersault before they get around to drawing up a real complaint and moving forward with it.

Susan McDougal, did you hear this about Martha Stewart flying in a hairdresser and getting new clothes from Bergdorf Goodman? You walked out the door in your prison orange. You know, I wish you had had a hairstylist and a makeup person with you.

MCDOUGAL: Well, they say such awful things about women.

GRACE: They do.

MCDOUGAL: You know they talk about how much we weight, what we wear, what our hair looks like. They don't do that with men. So, of course, we're pretty touchy about it.

There was a headline in the paper in my home -- not my hometown but in the Capitol where the trial was that said a heavier Susan McDougal comes to trial. You know would they have done that with some guy?

And then when I went to jail and lost all the weight, you know, they just drove that into the ground about, you know, why is she so thin? What's going on with that? And I've never seen that done with any male inmate.

So, of course, she's touchy about it. I mean how many fat jokes do you have to hear about yourself before you want to, you know, look your best when you go on television?

I have 14 people here putting makeup on me, you know. I lived the orange and the no makeup and the, you know, hair growing out gray. It's an awful thing to be judged that harshly in a public light constantly and she's been in the eye, the glaring eye of this for such a long time. If for nothing else, we should just admire that she has made it through that with some dignity.

GRACE: You know, Kareen Wynter, that press statement that was given by the jail could you repeat that please?

WYNTER: It's very, very short but it sums up what we've been reporting here Nancy. At 12:30 a.m. Martha Stewart was released from prison here in West Virginia. It went on to say also that additionally she was sentenced to a two term -- two-year term of supervised released, five months of which will be served in home confinement.

I want to touch on something also, Nancy. Martha is embarking on her new life here but we can't forget about the lives that she's left behind here through her Web site over the last several months.

She's been quite specific on the fact that she's not only formed a close bond with a lot of her inmates but she's also been thinking about ways to help first time offenders. A lot of women who are in jail right now, perhaps on drug charges, Stewart says imprisoning them, keeping them behind bars is really not the way that they need to be rehabilitated.

So, that's something I wanted to touch on because while this is a time of celebration for Martha Stewart, her fans who were out here, there are many women who remain here and we should perhaps expect that Martha will be taking up that issue, speaking out publicly not just on her business ventures but also on reforming the system, perhaps prison reforms or sentencing.

GRACE: Reporting from Alderson is CNN reporter Kareen Wynter.

Also with us Deborah Feyerick at the airport where we expect Martha Stewart to take off at any moment, don't want to miss that. Stay with us.

(COMMERCIAL BREAK)

GRACE: Martha Stewart has been released from Alderson Ladies Facility. Let's go straight out to Deborah Feyerick of CNN. Deborah, what can you tell us? FEYERICK: Well, Nancy, talk about a coming out party. Her private jet just was brought out from the hangar seconds ago. You can hear the engine coming. That means that she's probably about ten to 15 minutes away. She was released at 12:30.

It's a 30-minute drive in the dark. You have to go a little bit slowly because the roads are a bit dangerous and certainly icy, especially in the current temperatures. But, again, that plane is waiting and, Nancy, that thing could not be more front and center, you know, if it had a bulls eye on it.

She's absolutely going to be making that statement that she is back. She has done her time and she's going to take the helm of her company once again. She can't do it legally necessarily just because there's the SEC motion against her right now but there's no question who is at the center of all of this attention right now -- Nancy.

GRACE: Now, why is that, Henry, that because of the SEC she cannot make that public statement that she's back and she's taking over, she's resuming her position?

BLODGET: I think she can. I mean I think my understanding is the SEC actually has to win the case against her to aggressively bar her.

GRACE: But if she were to make that announcement do you think they would proceed?

BLODGET: No. I think certainly there's some thought that you're just going to antagonize them.

GRACE: Right.

BLODGET: But I don't think (UNINTELLIGIBLE). The SEC has filed the case. It's out there. They may not be aggressively pursuing it right now because settlement talks are going on.

GRACE: Well, you know, it's not where you go it's how you get there. That is some sleigh she's got.

NAUGHTON: Look at that plane, it's incredible.

GRACE: That is a serious ride.

NAUGHTON: So, what does that say? You know it's so ostentatious.

GRACE: I don't know but I want to get on that.

CASAREZ: Here's the question I have. Is this the same plane that she was in when she touched down in San Antonio December of 2001 (UNINTELLIGIBLE) and made the phone call, the phone call that started it all?

GRACE: Good question. Hey, Deborah, this is some ride she's got going on. It looks like they washed it for the event. FEYERICK: Yes, that is one nice plane as a matter of fact and I'm sure it's fully stocked with whatever Martha Stewart might want for the two-hour ride to New York. Those were a couple of reporters who went onto the tarmac but, again, they're going to be moved out momentarily.

Again, this is -- she'll be on that plane for about two hours heading back up to New York. She's got to stay within the judicial district. That's the Southern District of New York. She was prosecuted in Manhattan but the Southern District also encompasses Westchester, which is where her estate will be.

She's got 72 hours before she gets in touch with her probation officer. There's every possibility that she could spend the night at her daughter Alexis' apartment but that's unlikely.

There are as many reporters camped out at her home in Deptford (ph) as there are here at the Greenbrier Valley Airport, so you can believe that when she finally does get into her bed tonight there will be a lot of cold people with cameras and microphones out waiting to see what her next move will be -- Nancy.

GRACE: You know, Deborah, you mentioned a probation officer. Jean, do you know exactly how much supervision will the probation officer actually exert on Martha Stewart?

CASAREZ: Well, at this point with the house arrest there has to be a schedule made up well in advance of what her weekly activities are going to be. That has to be turned in. It has to be scrutinized.

GRACE: Would you like to see that Day-Timer, the Day-Timer of Martha Stewart?

CASAREZ: Yes, and subjectively they make her decisions because, you know, is it a business decision to go to the Emmys, the daytime Emmys? Her show is up for some awards, so is that part of work? Can she do that but not attend the party afterwards? I mean a lot of subjective decisions the probation department will have to make.

GRACE: How does that work? What do you think will happen Henry?

BLODGET: You got me in terms of that. I mean I...

GRACE: Well, OK. Probation officers that I have dealt with are overburdened, overworked and burned out. They've got thousands of cases they've got to handle but I think they would give this one some special attention, thoughts Keith.

NAUGHTON: Yes, well I think that she is a special case and they'll want to drop by, you know, they'll want to drop by just because...

GRACE: Around dinner time.

NAUGHTON: ...she'll fix them some tea and scones.

GRACE: To do a spot check.

NAUGHTON: Absolutely. Absolutely, think of the goodies. I just keep looking at this plane and I think who's traveling with her, if anyone? You know we talked about earlier Alexis has visited her almost every weekend but her mother has been unable to visit her. She had visited her one time in the whole time that she's been in prison.

CASAREZ: Her dear mother.

NAUGHTON: You know who she's very close to and who...

CASAREZ: I think she's turned 90 now.

NAUGHTON: Yes, she's 90. In fact, they appeared together on LARRY KING LIVE.

GRACE: I remember that.

NAUGHTON: Big Martha they call her and little Martha is Martha Stewart. And I just wonder, you know when will that reunion happen and I be that will be a very emotional reunion.

CASAREZ: Oh, it will and you know, Nancy, her mother was on her show with her so much. In fact, all the recipes that were handed down in the family come from her mother and her mother was going to put together a cookbook and Martha was going to publish it. It hasn't happened yet but I hope it does.

GRACE: What about that brother of Martha Stewart that put some of their family items up for auction? There will be heck to pay tonight when she gets to a private phone. What do you think about that Henry?

BLODGET: That's the first time I've heard that.

GRACE: The Singer sewing machine that she used to make her wedding dress, several items, a rocking chair I believe, Jean, wasn't it?

CASAREZ: All from the Nutley, New Jersey home from where she grew up.

GRACE: Auction, everybody making a buck off Martha Stewart.

Let me go back to Deborah Feyerick. Deborah, I hear a lot of commotion there. What's going on?

FEYERICK: Well, mostly everybody is just waiting for Martha Stewart to get here. The plane just behind me, the engines are ready to go and the airport manager had told us when we were making inquiries as to when she would be released, how she would be released, he said, "Well, the plane would be ready by 12:01" and we sort of said, "Well what does that mean?" He said, "The plane will be ready by 12:01."

So there was no question in the airport's mind certainly that they were going to make every accommodation that they needed to, to make sure that she got out smoothly. Right now we're keeping our eyes open just to see when her vehicle will get here.

We don't know whether, in fact, she'll switch vehicles or whether she'll arrive in one of those blue vehicles that you saw bringing her out of prison. We believe that those are indeed the cars that she used. Right now, everybody just waiting. First it was at Alderson, now the momentum has shifted over here to the airport -- Nancy.

GRACE: Deborah, is anybody in the plane? Is her daughter there? Is anyone there to ride with her home?

FEYERICK: We don't know. We've been trying to confirm that for the last couple of minutes in terms of who might be aboard the plane. We don't know. We don't know whether her daughter Alexis went to Alderson to pick her up, just the way she was with her when she dropped her off.

We just right now we really just don't know. Things are being very carefully orchestrated so the kind of information that we're getting is coming out in sort of little bits and pieces but we will certainly try to find out over the course of the next couple of minutes.

GRACE: You know her magazine has suffered.

NAUGHTON: Absolutely.

GRACE: What's the likelihood it will take an upturn?

NAUGHTON: Well, I've talked to advertisers who say they are interested in coming back over the next six months and the company itself is predicting in the second quarter the ads will increase. So, you know, there is the prospect of that magazine finally getting a little fatter again but it's still just a wafer compared to the Oprah magazine or "Real Simple."

GRACE: Let's go straight back to Deborah Feyerick. We think Martha Stewart has arrived -- Deborah.

FEYERICK: She has indeed arrived at the airport. Nancy, she has arrived at the airport. We were just handed a statement, a handwritten statement that was Xeroxed and just handed out to some of the reporters here.

It says, "Martha Stewart has arrived on Greenbrier Valley Airport at this time. She will be boarding the airplane in four to 15 minutes." That's from Jerry O'Sullivan, the airport manager here at Greenbrier Valley Airport.

So, again, the convoy made it in pretty good time and so now we're just waiting for that million dollar shot, whether it will be a smile, a wave, a wink. What will she be wearing?

Those are all the questions that seem to fascinate people. Again, we'll have that answer as she leaves West Virginia. I don't know whether she'll ever be back but certainly she's leaving in style.

GRACE: So, what do you think about Dominick Dunne's report that she is writing a book? Will it be about her time behind bars? Will it be about the trial, what?

BLODGET: I would think that would be part of it. She made a lot of comments after the trial that she just had no idea what she was doing initially when she was questioned and how hard it was to get good advice and really understand sort of the gravity of the investigation. So, I'm sure there will be a lot of that and Martha is a wonderful teacher and certainly that's a book that a lot of people could benefit from over time.

GRACE: Keith.

NAUGHTON: Yes, I think it will be a serve and tell kind of book and that will be fascinating. What's life like inside if you're Martha Stewart and what can you learn from it? How can you become a better person.

GRACE: What do you think Jean? I predict a bestseller.

CASAREZ: Oh, I do but if it's too controversial would that be a good thing for her at this point of time? Should she go into the domestic area more, something that everybody can enjoy versus something that could provide (UNINTELLIGIBLE).

GRACE: The domestic side of Alderson?

CASAREZ: No, the domestic side of living back to what she does best.

GRACE: Don't you think she'll write about her trial and life behind bars?

CASAREZ: Yes and I think that's a good thing and I think she should incorporate that in her shows but if it's too controversial of a book, lashing out, I think that could be possibly a negative and (UNINTELLIGIBLE) people rather than bring them together.

NAUGHTON: But the drama of prison is what makes her story so compelling. That's what Jeff Zucker of NBC said to me and, you know, Burnett says in "The Apprentice" you'll hear about the prison sentence, probably in the setup in the same way you hear about Trump making a billion, losing it, and making it back again. You're going to hear about Martha's hard luck story, so that's going to be out there.

CASAREZ: And that makes her a sympathetic figure.

NAUGHTON: Yes.

GRACE: Deborah Feyerick, I heard some more commotion while we were talking, any change? Have you spotted Stewart?

FEYERICK: We were trying to spot Stewart. As a matter of fact, a car drove up to the gate and everybody turned their cameras around to see whether, in fact, that might be her. It was a light-colored car.

But there are different roads that she can take when she gets onto the airport property, so she may have basically swung wide and is just getting ready really to make this big debut.

That's what everybody is waiting for but, no, we don't know where the caravan is. We're looking around trying to get some sort of a clue. Again, time is counting down. It should be, according to this message, 12 minutes left to go before she boards that plane.

GRACE: Well, Deborah, she faked us out at Alderson, all right, so you're the last resort. Don't let her fake you out, OK, because we (UNINTELLIGIBLE).

FEYERICK: I'm holding the line.

GRACE: You're holding the line, OK. You know interesting and I understand why she didn't want to be photographed coming out of Alderson but now I'm surprised she's not giving a statement, Henry.

BLODGET: Well, I mean I think the point was made earlier right on and I think they're certainly not hiding the plane unless it's a decoy plane.

GRACE: A decoy plane, you mean she's got two? She's got two planes?

BLODGET: Focus on this one. Don't listen in the background.

GRACE: Do you think the daughter, do you think anyone is on the plane with her?

CASAREZ: My gut tells me her daughter is with her. Her daughter was with her the entire trial by her side every day, visited her almost every week in prison. I don't think her daughter would not be with her now.

NAUGHTON: What I was told when I was doing that cover story over and over again is Alexis is someone to watch. She didn't used to want to have anything to do with mom's company but she's someone to watch because now she is interested and down the road she could have a leadership role in that company.

GRACE: Now what changed?

NAUGHTON: I think she grew closer to her mother through this whole crisis and I think Alexis went out and proved herself. She had her own ventures and gyms and other aspects that went very well for her, so she's gone out. She's done it on her own. And now if she came to work at her mother's company it wouldn't be like she was just copying her mother. It would be like she was bringing something fresh to it.

GRACE: We are at Greenbrier Valley Airports, it's in Lewisburg, West Virginia, waiting for Martha Stewart. She has been released as of about an hour ago from Alderson Women's Correctional Facility. She is there at the airport and is about to fly home to New York to start her probation. Now what exactly will that entail? First, there's house arrest. Which one of her residences will she...

CASAREZ: The Bedford estate in New York, so I would assume that is exactly where she's going tonight. I don't think she can stop off at the daughter's apartment because house arrest is beginning, although she doesn't have the ankle bracelet on yet.

She's still serving her prison term, so to the home for five months and then supervised probation for another 17 -- 19 months, so two years altogether from today she'll be completely finished with everything.

GRACE: So, how does the ankle bracelet work? Is it monitored by your phone?

CASAREZ: It's monitored by phone lines, that's right, not satellites as we've seen before with satellites but it's on her ankle and it's monitored by phone lines. That's why there has to be a direct phone line between the federal prison and her house.

GRACE: And can she take it off?

CASAREZ: She cannot take it off.

GRACE: Guys, let's go to Deborah -- Deborah.

FEYERICK: Nancy, right behind me two trucks pulling up. As a matter of fact, I'm going to pull out, I'm going to step out so you can get a better look. We've got a number of cameras here and it does appear that she's in that car, the blue one there.

And this is interesting, Nancy. As you can see, they're not pulling up right to the gate. There's going to be at least, there's about 20 feet from the car to the door.

So there she is, Martha Stewart.

GRACE: Martha Stewart and she's with her daughter.

CASAREZ: Wearing a shawl and it looks like jeans.

GRACE: Deborah, she was stylish. She was radiant. She had a huge smile. I believe that was her daughter with her, right Deborah?

FEYERICK: That was her daughter. That's Alexis Stewart that's on that plane. As a matter of fact, we'll just keep the shot there of the door. We don't know whether anybody else is onboard. You can see some of her belongings most likely in that box, maybe some of the transcript that she's putting together.

We heard that she was doing a lot of typing in the prison library. She had a footlocker in her room, a footlocker actually near her bunk and that's all she was entitled to in terms of the belongings she was allowed to have. She didn't come with a lot.

Clearly, she's not leaving with a lot, though she is indeed leaving in style. Just take a look at that corporate jet and those things are pretty comfortable and usually they come fully stocked.

So, again, that's it. She looks happy. She looked rested and she looked young. She was wearing jeans it looked like, jeans and a shawl, my God, you know. There's something about not having to work 60, 70, 80 hours a day (sic). So now we're just waiting for the takeoff basically here at the airport.

GRACE: Deborah, I'm not fashion maven but I believe that was a very, very fashionable poncho that she was wearing.

CASAREZ: Nancy.

GRACE: What?

CASAREZ: I wonder if she knitted it herself. I wonder if she knitted it herself.

NAUGHTON: She looked very hip (UNINTELLIGIBLE).

GRACE: She looked very hip, hot and happening.

NAUGHTON: She did.

GRACE: I got to say she looked fantastic. She's a lean, mean fighting machine.

NAUGHTON: And I loved when she turned and did that wave.

FEYERICK: And what's interesting...

GRACE: What Deborah?

FEYERICK: You know and Nancy what I was going to say as well is that she just looked much more casual than we've seen her before. I mean granted, you know it is almost one o'clock on -- well it's one o'clock on Friday morning, so it's not as if she's going to dress up but, in fact, she just looked very relaxed and really started waving and smiling and looked warm.

I mean even throughout her whole trial, she never looked sort of warm and comfortable as she did right now. Maybe that's just part of the image makeover or maybe that indicates a real change.

GRACE: Martha Stewart is on her plane. I believe -- this is a shot of Stewart.

BLODGET: That we are going to see again and again and again.

GRACE: There she is. She emerged happy, smiling, with her daughter. Hi, Martha.

BLODGET: And here's the (UNINTELLIGIBLE). GRACE: Wave.

NAUGHTON: Yes, here it is.

BLODGET: That looks perky. That is a perky wave.

CASAREZ: Yes, it is.

BLODGET: She looks upbeat and perky.

GRACE: Well do you blame her? There's a little champagne cork popping inside that plane tonight, oh yes.

NAUGHTON: She looks fabulous.

GRACE: Yes, she did. She really did. So, long story short two- hour flight back to New York.

CASAREZ: In 72 hours she has to report to the probation department to be fitted with the ankle bracelet. Probation has to come out to the house to get the phone line and the receiver all set up and she starts house probation.

GRACE: Do you think she'll make a break for it in 72 hours?

CASAREZ: No.

GRACE: I mean she's got a private jet.

(CROSSTALK)

GRACE: Everybody you are seeing a live shot of Stewart's jet. She's about to take off from Greenbrier Valley Airport, Lewisburg, West Virginia to start a new chapter in her life.

She's been behind bars for five months, a long and tortuous trial and many people thought she had been targeted by a couple of federal prosecutors as a trophy defendant. While many people had accepted Stewart had made an inappropriate trade was she persecuted at trial?

And there she goes.

FEYERICK: And, Nancy it's interesting. It's sort of kicking up a cloud of dust here as the plane pulls away, a little bit symbolic there.

GRACE: There she goes everybody. You know what I've waited until 1:00 a.m. I want to see this plane take off. I guess I'll go to the New York airport and wait to see it land.

NAUGHTON: They orchestrated it and it worked.

GRACE: OK, you know what, they said she was down but she's not down and out. Martha Stewart making a comeback. There she goes everybody. We've waited up all night. She's free. She's back. We're going to see what happens now. This is a shot of Martha Stewart's jet. She was released around 12:30 a.m. from Camp Cupcake, Alderson Women's Correctional Facility after five months behind bars.

She apparently wrote a book and brought it on her plane in a huge box, accompanied by her daughter. It's slowly disappearing. Martha Stewart taking off for another chapter in her life.

Final thought.

NAUGHTON: Well, I think this is the triumph right here. This is the proof of the words she said last summer on those courthouse steps when she declared "I'll be back. I will be back."

GRACE: And here's Stewart emerging. This is the first sight of her outside prison walls for the last five months. No way was she going to show up in prison khaki.

You know I don't think I've ever seen anyone emerge from behind bars looking that good, Jean Casarez.

CASAREZ: You know it reminds me of young video that I've seen of her the bounce in her step. I haven't seen that bounce in a long time.

GRACE: Well, can you blame her?

CASAREZ: No.

GRACE: Henry.

BLODGET: Yes, she must be thrilled.

GRACE: This is a shot...

FEYERICK: Nancy.

GRACE: Go ahead Deborah.

FEYERICK: The one thing I was going to say and that is she almost seemed pleased and delighted when she heard supporters here at the airport calling out and cheering for her as she boarded that plane.

She heard that at the courthouse during her trial but there was such a seriousness, such a gravity about the whole thing that you never saw her even really smile that warmly to supporters. The fact that they came out at one o'clock on a very frigid West Virginia night seemed to make her happy.

GRACE: She has released a statement on her Web site stating "The experience of the last five months has been a life altering experience." Martha Stewart has already gotten online and released a statement.

I want to thank everyone that's been with me tonight, Deborah Feyerick, Susan McDougal, Henry Blodget, Jean Casarez, Keith Naughton and you for being with us.

I'm Nancy Grace signing off for Larry King tonight.

"PEOPLE IN THE NEWS" is in progress right now. Thank you for staying up late with us everybody. 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 4, 2005 - 00:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
NANCY GRACE, HOST: This is a live shot of Alderson Federal Women's Prison, Alderson, West Virginia. Martha Stewart is about to walk out after five months behind bars.
We've got a panel full of guests, but first let's go straight to CNN's Kareen Wynter. She's there on the scene.

Hi, Kareen. What's the latest?

KAREEN WYNTER, CNN CORRESPONDENT: Well, there's quite a flurry of activity out here, outside of Alderson facility, which is about a mile down the road to the (UNINTELLIGIBLE) in the area, the flashes here (UNINTELLIGIBLE).

We're awaiting Martha Stewart's arrival, coming out of prison after serving her five-month prison sentence. Now, I can tell you behind me here...

GRACE: Kareen, hold on just a moment. We've got to get your audio fixed. Everybody, welcome to LARRY KING LIVE, special live edition tonight. You are looking at Alderson Women's Correctional Facility, also known as, a.k.a Camp Cupcake.

Martha Stewart has been behind bars, as we all know now, for about five months. She's headed now toward home imprisonment, house detention. It will be quite a switch. Welcome to LARRY KING LIVE. Again, I'm Nancy Grace.

Let's go to our panel until we get re-hooked back up with Kareen Wynter, CNN reporter right there at the gates of Alderson. We're waiting to see Martha Stewart released. It's caused quite a stir.

First, let me go to Jean Casarez from Court TV. Jean, she's headed from behind bars to home detention. Now, how does that work? Where will she be fitted with her monitoring bracelet?

JEAN CASAREZ, COURT TV CORRESPONDENT: Right. Well, she will not have it on when she leaves the prison tonight. She's got 72 hours, and in those 72 hours, she goes to a probation facility, meets with the probation officer, gets fitted with the bracelet that will go around her ankle, by the way.

So then probation has to come out to the house, because the transmitter, the monitoring system, has to be hooked up with a phone line at her home, a direct phone line to the Bureau of Prisons.

GRACE: Now, does she go in and around the house?

CASAREZ: That was the question I asked. The federal system does not allow it. You know, normally in state systems, maybe 200 feet beyond your home you can go. She can't go outside of the house.

So the -- the spring garden?

GRACE: Yes.

CASAREZ: I don't think she's going to be able to do it.

GRACE: Also with us is Henry Blodget. He is a contributor to "Slate" magazine. He's actually been in the boardroom with Martha Stewart. We've got our eye peeled on Alderson Ladies' Prison. We have a reporter there live. We can't hear a word she's saying right now, but we can see. And I am waiting to see Martha Stewart come through those gates.

Henry Blodget, what do you make of it all?

HENRY BLODGET, CONTRIBUTOR, SLATE MAGAZINE: Well, we're sitting here glued to the monitors. It's a remarkably dramatic moment. But it will be interesting to see when she comes out. She's supposedly going to speak at the airport, which would be very interesting to hear what she has to say there and then obviously, in the next few days.

GRACE: You know, Henry, what's interesting is what Martha Stewart did, and there's no doubt that she did it, it did not take money out of anybody else's pocket. No one else was harmed because of the stock. The stock was spiraling downward because Erbitux had been rejected by the FDA.

At the time, her trade had no effect on anybody else. No regular people like us were harmed. And I think the story's caused a lot of resentment, because she went to trial while other corporate leaders that were like pigs at the trough walked free.

So this is a sort of a triumph for her.

BLODGET: I think it's obviously been a personal disaster for her in some ways.

GRACE: I mean today.

BLODGET: Coming out, absolutely. And I think it will help people certainly forgive her and look to this as a big comeback, rather than to the fact that she should still suffer.

GRACE: Again, we are posted outside Alderson Ladies' Correctional Facility, waiting for Martha Stewart to emerge.

Now actually, her release date, Keith Naughton -- Keith Naughton is with us from "Newsweek" -- I believe was supposed to be over the weekend. They don't release over the weekend, so she's getting a couple of bonus days. KEITH NAUGHTON, "NEWSWEEK": Yes, she's getting out early. She's getting an early release, two days before her official release date. And you know, when you think about it, it's amazing the transformative powers of incarceration. Because she went into prison under the dark of night. None of us were there. There were no cameras. She slipped in without us seeing. And at the time, she was the villain.

Now she emerges from prison in the light before these banks of cameras. And she's a hero. She's a folk hero.

GRACE: I'm going to go out on a limb again and try to go to Kareen Wynter, our CNN reporter there at Alderson.

Kareen, I thought for a moment they dragged you inside. Tell me the latest.

WYNTER: Well, the latest is a lot of buzz out here, awaiting Stewart's arrival. We're right outside of the facility.

Nancy, I have to tell you, in the last several minutes, there's just been incredible activity, vehicles coming in and out of Alderson.

Now, what you're looking at is the route that Stewart is expected to take as she gets her first taste of freedom, as she drives out. The clock has struck midnight, which means that any time now she could be walking out of here.

And I can also say there are many supporters out here waiting with the media in the cold, supporters from SaveMartha.com. They're from Seattle. They have their signs. They have their cameras.

Quite an exciting time, but really what we're waiting is to see if Stewart will be making her way out here any second now -- Nancy.

GRACE: Also joining us is Susan McDougal. She's the author of "The Woman Who Wouldn't Talk." You remember her from Whitewater. Susan did time behind bars after a lengthy and multi-million dollar investigation by the federal government.

Susan, what do you expect Martha is going to do day one from behind bars?

SUSAN MCDOUGAL, WHITEWATER CONVICT: You know, I was just wondering if tilling the garden and cultivating it would be part of that 49-hour work week. Because I think she could argue that. And still do the garden. Because she does get to work outside the home for awhile and I can see her arguing that and actually getting the garden in.

GRACE: You know what? I have a different fantasy. I would definitely go for a big stack of pancakes at Denny's.

So what was the first thing you did when you got out, Susan?

MCDOUGAL: You know, I invited everyone who was watching television to come to a party in Little Rock, Arkansas. And a lot of the world came that night. Everyone -- I just said, "Please, everyone come and say hello. You know we're going to be at the Capitol Hotel all night long. And people came from all over that night to -- to welcome me.

GRACE: So you partied hardy. Somehow, Kareen Wynter, I don't see Martha as having a party tonight. Also, let me clear up, you're telling me fans are out there in the cold, waiting for Martha Stewart to come out.

WYNTER: It's an incredible site. They have their cameras. They have their little notepads already, maybe wanting to capture the moment, perhaps keep it as a journal.

They were out here earlier today, as well, Nancy. Just monitoring things, knowing that it would be hours until perhaps you would see Stewart. But there's some very, very loyal fans out here. I should also add -- I don't know if you caught this off the top -- but under choppers above us.

It's quite a scene out here, Nancy. There are crews for left and right but another big staging area is just, perhaps about half a mile -- half -- an hour away from here, rather. We'll be at that airport, where Martha will be boarding that plane. So that will be also another site where a lot of fans are expected to descend.

GRACE: At the Greenbrier Valley airport there in West Virginia is CNN correspondent Deborah Feyerick.

Hi, Deborah.

DEBORAH FEYERICK, CNN CORRESPONDENT: Hey, Nancy. Well, Martha Stewart's plane landed about 11:30 this evening, a small private plane taxied down the runway and went into a hangar. It is now standing by, waiting for Martha Stewart. We were told by the airport manager that that plane is going to be ready to go as of 12:01. That is the earliest that Martha Stewart can be released. She's not going to be spending an extra second in that prison.

She's going to be handing in her prison khakis, closing out her commissary account, and then changing into clothes so she can join her caravan and get to the airport. It's about a 45-minute ride from Greenbrier. I'm sorry. From Alderson here to Greenbrier Valley Airport. A lot of chase crews, actually, waiting outside the prison. They're going to see if they can get pictures of her en route.

But interesting, Nancy, she came under the cover of darkness.

GRACE: This is crazy.

FEYERICK: She was -- it's totally crazy, and there are about 10 of them that are waiting to get a picture of her in front of Alderson Prison. When she arrived, there were no pictures at all, even though everybody was standing by. As a matter of fact, she slipped in just before 6 in the morning.

People were actually running, taking tapes out of their cameras to see whether in fact they may have captured her on film. Most people simply missed her when she slipped in.

Now she's coming out, but here's the interesting thing. All those same cameras are waiting in position. Will they get a shot of her next to Alderson Prison? She didn't want it going in. We don't know whether she's going to want to get -- want it going out.

What she is going to watch is a picture of her here, walking towards that private jet, just like "Casablanca," through the darkness to the private jet, taking it to her future. Her company actually brought in a flatbed truck and mounted cameras on top of that flatbed truck.

And I don't know if we can sort of pan off just now. We hadn't planned for it. But there's an entire flatbed truck. And Nancy, there was actually a smaller truck. When they realized how many people are going to be standing on top of that, they brought in a larger vehicle.

GRACE: Hysterical.

FEYERICK: And again -- that's right, and Martha Stewart, she's going to be leaving. And she's going to be leaving in victory. We're here waiting for -- to see a smile, to see a wave, to see some sort of acknowledgment that she's heading off to a very bright future.

She's not going to make a statement, we're told. What she is going to do is once she's on that plane, go to her web site. Because there's going to be some sort of a statement on that web site, saying that she's out -- Nancy.

GRACE: Deborah Feyerick is standing by at the airport. Everything's ready for Martha to take off. Kareen Wynter, standing by at Alderson and guys, did you just see some guy sneak around?

UNIDENTIFIED MALE: Like a moonwalk.

GRACE: And he snuck around the back. Why is everybody so crazy about Martha getting out of jail?

BLODGET: She's a classic American story, and I think, certainly, she was the epitome of the 1990s. And then symbolically was the epitome of sort of the corporate crash and greed and so -forth.

GRACE: Well, I've got a confession. I'm going to confess right now she gave me a subscription to "Martha Stewart Living," OK? And I read it. I read it.

BLODGET: It's a good magazine.

GRACE: I might do one day when I have enough time. It's like a fantasy, right?

CASAREZ: It is, it is. I gave it to you a couple years ago because I know you love to cook. And so do I. And so I've made her a believer now. GRACE: Here's the thing. You know, the reality is I think most people, most lawyers believe that yes, she did the trade. There's no doubt about that. But still, what you're saying is true, she's almost attained some type of a hero status. Now, how has that happened?

BLODGET: Well, it -- it's come because she finally showed some repentance. By going to jail voluntarily, instead of -- instead of fighting her appeal and staying out of jail, she showed some act of contrition. And she's benefiting from that now.

And plus, when she was inside she befriended the roommates. She didn't keep her distance. She embraced them. She became friends, taught them how to cook better in the microwave, taught them how to start their own business, and in return, they protected her from paparazzi. So she became friends with her fellow cons, and that makes her more human.

WALLACE: Again, we have our eyes pealed on Alderson Women's Correctional Facility. This is a live shot, and we're waiting for Martha Stewart to finally break out on the big house. She's been behind bars five months.

Now she's got not only house arrest, Jean Casarez, but she's also going to be under supervision for how long?

CASAREZ: Nineteen months after that. So 19 plus five is 24. You've got two years now that she's either going to be under that house arrest or supervised probation. And that means a lot of things. A probation official can go to the house at any moment of time for the next two years to see what she's doing.

She can do at least 48 hours...

GRACE: To see what? A totally meticulous house?

CASAREZ: Probably.

GRACE: A garden in the back yard?

CASAREZ: Probably.

GRACE: What? Weaving her own rug?

CASAREZ: Yes. But the fact is, your privacy can be violated, you would think, any time that the probation office wants to do that. So that's part of all of this. But she can leave for 48 hours a week, not only for work but for medical, for dental appointments, for church activities. And also to go to the market to buy groceries.

GRACE: What about out of state trips?

CASAREZ: Do you know what? She can be traveling out of state, because if you look...

GRACE: So if you can't leave your house but you can leave the state? CASAREZ: If it's a business purpose. If it's work related. But now remember, probation office would have to OK all of this well in advance, which is not something (ph). Because this is a house arrest situation. It's not complete freedom.

But there is a chance that she could fly out of state, but that might be her big trip of the week, because 48 hours, that's all she can leave.

WYNTER: It's -- actually, feels like it's in the teens out here, Nancy. It's -- there's a lot of snow on the ground. We're all dressed quite comfortably for the weather in our boots and our jackets.

But the air out here is quite electric. Five months of imprisonment has come down to basically a matter of minutes, perhaps, that we could see Stewart surface from behind these walls here.

So it's quite a fitting moment, a big moment for her. And fans don't seem to mind. We heard the prison guards, prison officials behind us actually yell out, asking people to clear out of the road for safety reasons. There are a lot of vehicles coming in and out. It's quite dark out here. They don't want anyone getting hurt in the process, but just to set the stage on what exactly is unfolding out here.

GRACE: Keith Naughton is with us from "Newsweek." How has prison changed her? Now, was it "Newsweek" that had her picture on the front, with her head and somebody else's body.

NAUGHTON: That's us, yes. That was us.

It was a photo illustration. The idea was that it was supposed to be humorous. People were supposed to recognize that Martha is in prison...

CASAREZ: I thought it was her.

NAUGHTON: She probably wasn't available for a cover shot for us. But you know, if it was too close to reality, and it fooled some people, well, that's not what we had intended.

GRACE: So tell me how -- how you believe prison has changed her.

NAUGHTON: Well, I think that what it has done is it has humanized her. It has -- it has made her seem more like one of us, more down to earth. So it sort of chipped away at that kind of ice queen image she had.

Now the question is, can she maintain that when she comes out, or will she return to the Martha of old? That will determine whether her comeback succeeds or fails.

CASAREZ: We all heard about the possibility of future plans.

GRACE: I'm talking a reality show, a book, you name it. What do you know?

NAUGHTON: Well, she's got the two shows coming. She has "The Apprentice" with Burnett, marketing.

GRACE: How big is that?

NAUGHTON: It is going to be just like Trump's "Apprentice," except difference. It's going to be the Martha version of "The Apprentice." We won't be in a boardroom, but we don't know where she'll fire people. But she will fire people. But she won't say, "You're fired."

So they're waiting for Martha to come out to say exactly how she's going to get rid of her...

GRACE: She'll probably give them a pink engraved pink slip.

NAUGHTON: Right. She could. She could give them a cake and tell them when to eat it.

GRACE: OK, she's got the reality show.

NAUGHTON: Yes. And then she has a daytime show that also will be different than the old sort of sterile one. It will be live in front of a live audience.

GRACE: I didn't think it was sterile.

NAUGHTON: Well...

CASAREZ: I didn't either.

NAUGHTON: Mark Burnett did, and he thought the lighting made her look cold, which only reinforced the bad imagery. So in any event, it will be live and she'll -- she'll -- if flubs happen, that's OK. It's supposed to be funny. It's spontaneous. She'll have celebrity guests. It will be for an hour.

And already 85 percent of the country has bought it, and it's not even on until September. All top 20 markets have already bought it.

GRACE: So what about a book?

NAUGHTON: Well, there is a rumor that she's thinking about doing something on her prison experience.

GRACE: Well, I read where Dominick Dunne wrote that she had a multimillion-dollar deal on a book. True or false?

NAUGHTON: I don't know. But it sounds like a good deal to me. It sounds like she could easily get that deal, because everybody wants to know about Martha's life inside.

GRACE: Susan McDougal is with us. Susan did time behind bars on civil contempt charges regarding Whitewater. Susan, do you remember the moment you got out of jail? MCDOUGAL: Yes, I do. I vividly do. In fact, my stomach's full of butterflies for her. I was released out of the courtroom in my orange. The judge said to walk out of the courtroom, actually.

And so I walked out. I had no clothes or anything. The cameras were out there, you know, all of the satellite trucks. There were a lot of people who cared about what had happened to me and had followed my story out there and waiting for me and cheering and it was surreal. It was -- I couldn't even take it all in.

I remember thinking, you know, the sun was shining and I was outside for the first time in a long time. And it was a really surreal moment.

GRACE: Deborah Feyerick, I think a lot of people had hoped she would make a statement at the airport. Why not?

FEYERICK: This whole thing has been so carefully orchestrated, Nancy, that it's unclear why she decided not to. As a matter of fact, there has been some speculation that perhaps while she -- when she left Alderson, she might actually come to the prison gates and make some sort of statement before getting into a van and driving off.

That changed, and now we're really just going to be able to see her here boarding that plane. We're told that, you know, she'll have some of her belongings in the van with her, so she'll probably be wearing a coat, because it is cold, as you mentioned. And then she'll go off.

And you know, talk about softening her image, as well. She wrote a very powerful letter over the holidays, talking about prison reform and saying how Americans should really get on the bandwagon and speak out against mandatory sentences. Of course, the judges ruled that they weren't right, that there should not be a mandatory sentence.

But the fact that she's now possibly speaking out as a prison reformer, we'll see how long that lasts when she does go back to her empire and begins putting that part of her life behind her.

GRACE: Susan McDougal, do you believe that she will try to help inmates when she gets out?

MCDOUGAL: You know, that's the most interesting part of this whole story to me. I'm really not interested in a lot of the other things, but it's going to be interesting to me to see is she a better person? Is she a humbler person? Did she learn some lessons from the women in there?

And believe me, they have a lot to teach you. They've been through a lot in life, and they've survived it. Which I always thought was an amazing thing, when you hear their stories.

And you king of find out very quickly that you're not the center of the world. And I think for Martha Stewart, she's been the center of her world for a very long time. And I'm interested to see, you know, will she be a kinder, gentler person who cares about other people? I think money was her downfall and maybe the love of money was her downfall.

And I'm -- I'm really interested to see if people become a very big part of her life. They say her daughter and she have gotten very close during this, and I found that was true for myself. And I want to see, does she keep up those relationships? Can she forge a relationship with a man? Will she marry? Will she be gentle enough and have enough love in her heart to have relationships with people and not just with things and money and clean surfaces?

And I -- I think I'm going to tune in, just to see will that last? Because it's very easy when you get out of jail to revert to form, to become the same person who's running through life as fast as you can run. And you have to almost sit down and say don't forget how you felt when you were locked up so that you can be that person.

GRACE: Susan, is that how it affected you?

MCDOUGAL: I'm a better person. I'm a much better person today than the person who went to jail. I went in angry and bitter, and there were nights I couldn't sleep with the anger I had in my heart. I had lost any relationship that I had with God and with my fellow man, because I was an innocent person, and I was so angry.

And the women in there taught me, through the stories of their lives, through the things they had been through, that you can survive anything and you can be a better person for it. I love all of the women that I met. There aren't any that I couldn't say could teach me something, because they had been through things that you read about in books but you don't believe really happen to children and to young people. And I am a better person for it.

And I know I'm a humbler person for it. And I think I'm more connected to people. And I pray that she got that lesson in the five months she was there. And I'm waiting to see. I'm going to tune into her shows, and I'm going to watch her life. And I'm going to see if that's true.

Because she could do so much good. This could have an affect that would -- it would change people's lives forever. If they change mandatory minimums, I can't tell you the number of people who could go home.

GRACE: You know, Henry Blodget, what she is saying is -- is very profound, actually. And you have had dealings with Stewart. Do you think that this metamorphosis could happen for her?

BLODGET: I think it's an incredibly important point. And if you really -- if you look back at Martha Stewart, obviously she's taken a lot of crap, a lot of petty stuff that's thrown at her because she's a woman and a CEO and so forth. But one of the things...

GRACE: And she did make the trade.

BLODGET: That's right. But one of the things that did seem to be true coming out of the trial is that she, in many cases, did not treat the people who work with her very well. And you know, again and again you'd hear that and how impatient she was and how angry she could get and so forth.

And so to the extent that this is an opportunity to step back and say, "Look, I have done this incredible thing with my life, but there's one thing missing for me to actually become a really inspirational person, not just business leader." That would certainly be it, what Susan's talking about.

And I'd like to see that. I've never seen that. Martha's always been incredibly charming when I've seen her. But just you hear again and again these stories. And it will be very interesting to see whether that's changed.

GRACE: OK. We're seeing some movement there at Alderson. Let's go straight out to Kareen Wynter. Kareen Wynter, what's going on?

WYNTER: Well, the prison captain just walked out, Nancy. You can pan over a little bit to my right. We're constricted with all the crews out here. But he's clearing away the people that have lined up on the hill to my right.

Now this is where Martha Stewart is expected to be driving out. There's a lot taking place behind it just a few seconds ago. We're told that prison guards got into action. Some came out of their car. Others went in. They were flashing their lights, perhaps to signal that they would be taking Martha out or leaving her out of prison. But we're standing by and waiting to see right now -- Nancy.

GRACE: Jean Casarez, it's not over yet. There's still the specter of the SEC.

CASAREZ: You're right. That's the reality. Her legal troubles aren't over yet. First of all, the appeal is going forward. But also the SEC. It's a civil action. It basically involves money, so a lot of people say, "Look, what's the big deal? It's not prison time, it's money."

But it involves something extremely important to Martha Stewart. The SEC is asking that she forever be barred from being a director or entertaining officer duties with her company. And you know, this is critical to Martha Stewart.

So it is believed settlement talks are going on, and instead of a lifetime bar, she would probably want something short of that. Now, I understand the SEC does not allow less than five years of disbarment from being a director or an officer. But maybe something could be worked out that in five years she could do that.

GRACE: Keith, back to your "Newsweek" story. Incredible story. Now that you've listened to Henry and Jean and Susan discussing it, what changes do you really expect in Martha Stewart?

NAUGHTON: Well, you know what? She needs to change. It is -- she needs to take the ability. She needs to be directed. She needs to have somebody else -- she needs to become a subordinate. She needs to be stayed...

GRACE: Why?

NAUGHTON: Well, because this high-powered team of, you know, Hollywood and New York A-listers have come together to stage manage her comeback. And if she fights them instead of going with it, it will be a disaster. It will just be a fight.

She has to learn how to take direction from these very good people who have some very good ideas about how to bring her back. And if she doesn't, one of the stations who bought her show said if she has one idea and Mark Burnett has another idea, well, that's just a recipe for failure. They need to be on the same page.

MCDOUGAL: I -- I hate to disagree with that, but one of the best things about jail and prison that I found out is to be yourself and to fight anyone who tries to make you anything else. And to be as real and honest and truthful about who you are and about the feelings you have and that you will never go wrong doing that.

And I would tell her if they try to make you into something else, stand your ground and be the best person you know how to be and show that to everyone in America, and they will love you. And they will come to you.

And if Mark Burnett wants to make her into something that she isn't, she needs to fight it.

GRACE: You know, Susan, I don't think that Martha Stewart can be made into something other than what she is. Is that what you're suggesting?

NAUGHTON: No, it's not. What Mark Burnett said is the woman he came to know is very funny and witty and spontaneous. And none of that ever comes through in her -- in her old show.

GRACE: No. I agree.

NAUGHTON: What he wants to see is the humorous Martha come through that maybe people caught a glimpse of on Letterman or other shows that she would be on but never on her own show. So that's what he wants, the spontaneity, sort of fun loving personality that never comes out.

GRACE: Henry, how has this affected her financially?

BLODGET: Well, fortunately she had quite a bit to begin with, even with the stocks...

GRACE: Yes.

BLODGET: ... getting crushed. But since she's been in prison, and everyone's started to look forward to her coming out...

GRACE: I don't know how you could say jail is a good career move, but apparently, that's what people are saying.

BLODGET: Well, people in the stock market certainly have been looking forward to the release. And the stock has anticipated that.

GRACE: Jean?

CASAREZ: I think America is opening its arms to Martha Stewart right now, but I agree with you completely that if -- if the arrogance comes out when she comes out of prison, instead of talking about the experience or maybe having someone that she was in there with on her show to help that person in life. I think America will grasp onto that and move forward with her.

GRACE: You know, we still have our eye peeled on the Alderson Correctional Facility. I'm getting word in my ear we think Stewart is about to emerge.

Now, as Kareen Wynter told us earlier, there are actually chase crews that are going to try and chase Martha Stewart to get a photo of her. How much do you think that photo would cost, Keith, of Martha Stewart, you know, posed or caught posed beside the Alderson Correctional Facility sign?

NAUGHTON: There have been so many horrible photos of Martha Stewart taken in the last three years, you know, running from the paparazzi. I think what her people are trying to do is stage manage a triumphant moment here. That's why they have the flat bed truck out there. They're trying to get the reverse version of the old Nixon waving at the helicopter shot.

GRACE: Oh, yes.

NAUGHTON: They want her to be raising her arms in triumph and showing that she is back, as she had promised.

GRACE: Let's go to Deanne Stein with WOWK. Deanne, what can you tell us?

I think I've got Deanne with me. Deanne, are you there?

DEANNE STEIN, WOWK REPORTER: Yes.

GRACE: Hi, Deanne. What can you tell us? What's happening there at Alderson?

STEIN: Well, we're still watching and waiting, basically. We have, you know, the local news affiliates here as far as network and we're all just, you know, shooting every car that comes out of those gates, basically, hoping, you know, that it will be her.

GRACE: Deanne, is there a way she could have already left and gotten by everyone?

STEIN: Well, you know, there is a back way into the prison, and we have at times gone back and forth, you know, debating over should we be at this back gate? Should we stay at the front gate?

Really there's no way to know at this point, you know. And I know when she came in five months ago, they didn't let us know until she was actually in there. I'd say that's going to be the case here unless we actually get a visual of her leaving.

GRACE: We've got our eyes trained on Alderson Women's Correctional Facility, a.k.a, also known as, Camp Cupcake. Where did it get that name, Henry?

BLODGET: You got me. But I -- I will...

GRACE: There's somebody official. And he's walking along as if he means business. He's ordering everybody out of the way. Go ahead, Henry.

BLODGET: Going back to the -- what Keith is talking about, Mark Burnett trying to bring out some of Martha's humor and so forth. You alluded earlier to my being in the boardroom with her. I was in a very tense corporate situation. A big deal was being discussed.

And it was very odd, because this was actually -- Martha sitting next to me would one second be talking about this transaction, the importance to the company and so forth. And she'd look at me and say, "Are you married? We have to marry you off." And you know, these people we're going to do it with and so forth.

So obviously, that spontaneity is there, and I think if you can capture that in an "Apprentice" situation, it would be great for her.

GRACE: Deanne, do you think -- OK, what is happening right now? Are they releasing a statement?

KLEIN: It looks like this is a press release. I know five months ago when she went in, as soon as she did arrive into the facility, this is what they did. The federal, you know, people came out. They gave the press release to all the media.

Actually, I'm not there. I don't know what they're actually releasing at this point. But I'm assuming that's probably what they're releasing.

GRACE: Deborah Feyerick, Deborah Feyerick, how would it benefit her not to be photographed leaving Alderson?

FEYERICK: Well, it's very interesting. That's not exactly the image that she wants remembered. What she really wants is an image that... * GRACE: Deborah Feyerick, how would it benefit her not to be photographed leaving Alderson?

FEYERICK: Well, it's very interesting. That's not exactly the image that she wants remembered. What she really wants is an image that shows that she's been empowered, that she's going off to begin the next stage of her career.

And of the last month it has been so carefully managed. The new CEO of her company has been talking, putting a public face on this imprisonment. The editor of "Martha Stewart Living" magazine came out with a very friendly editorial saying, you know, "We now have a whole section on Martha and how she's getting out."

GRACE: We see a car leaving. I'm just wondering is that Martha Stewart?

FEYERICK: You know, Nancy, that's what's so interesting.

GRACE: Don't know yet everybody. We are waiting for Stewart to leave. Go ahead, Deborah.

FEYERICK: Well, what we saw happening is we saw a number of cars that were going out or coming in actually when she first arrived. I'm sorry. When we were there this evening, we saw a number of cars and they almost looked like they were doing a dry run around that area. We couldn't quite figure out exactly what it was they were doing.

As you can see, all of these cars pretty much similar models. We don't know whether, in fact, the reason they're doing that is because there are chase crews out there hoping to follow Martha Stewart to get some sort of a picture.

Again, the point that you raised earlier she really doesn't want to be photographed at Alderson Prison. She wants to be photographed here. This way she can put that part of her life behind her and what we're waiting to do is try to get some details of what exactly the statement has contained.

But that's exactly what she did when she entered prison, the moment she entered that prison that captain walked out with a statement and her Web site went on -- Nancy.

GRACE: Let me announce Martha Stewart has been released. Stewart has been released from Alderson Women's Correctional Facility. I assume, Deborah, she's on her way to the airport right now and what will take place there?

FEYERICK: Well, what will take place? First of all, it's about a 30-minute ride and it's a very, very dark road that she has to travel on. It's about ten miles before she actually gets onto the highway and there are deer out there. There are pheasant. There are a lot of animals along that road, so she's going to have to go carefully.

Then once she gets here to the airport they're going to bring out the private jet, which is now inside that hangar. The statement said that at 12:30 is when she left that prison, so that's obviously just moments ago, likely she may have been in one of those two blue cars.

There are back routes that can take her from the prison here to Greenbrier Airport but, again, the plane will be brought out. It's not a large plane but it is a very sleek private jet and we're not quite sure exactly who she is with right now but there's a lot of activity here.

And, Nancy, why don't we just give you a quick look-see as to what's going on here because, again, just so you can feel some of the excitement that's happening here. People know she's now going to be arriving at the airport. You've got still cameras on that flatbed truck that was rented by her company. You have an advance man on the ground making sure that everything is running smoothly. You have still photographers.

This is the kind of press that you see at any celebrity event. This is the kind of press that you see when you cover fashion shows. That's the kind of deal we're talking about.

This is not the Martha Stewart who went in, whose name was shrunk on her very own magazine. This is a Martha Stewart who has been brought back into the fold of her company and even the editorial that was written in the magazine, you know, talking about Martha, Martha, Martha.

When the statement goes up on the Web site it's not going to be on her private Web site, marthatalks.com, which is what happened when she went in. It's going to be on the company Web site. So, again, a really fundamental shift in terms of how Martha Stewart is being packaged at this moment in her life and in her company's history -- Nancy.

GRACE: Keith, is there any way that she can be CEO of her company?

NAUGHTON: Yes. She's trying to cut a deal right now, in fact, with the SEC to limit this ban on being an officer or director to five years or less and then she can return as the CEO.

And, you know, her mother is still very lively into her 90s, so Martha at 63 is probably really only at middle age. So, there are plenty of years ahead for her to be CEO.

The question would be though she recruited Susan Lyne (ph) to the company, Susan Lyne who was the ABC executive who green lighted "Desperate Housewives," how delicious is that? And since Martha is the original desperate housewife and so could she really recruit somebody that high power and then shove her out of the way?

GRACE: Now, why do you say Martha was a desperate housewife?

NAUGHTON: Well, she was. She was living...

GRACE: She was the head of one of the biggest companies in the world, hello.

NAUGHTON: How did it being? As a caterer in Westport she was -- she was in that house and she felt desperate. She wanted to get out and do something bigger and she did and here we are today.

GRACE: Jean, why do you believe that Martha Stewart is such a polarizing figure? People either think she should stay in jail or they think she was persecuted, why?

CASAREZ: You know, I think it has to do partially with the dichotomy of her being just such a homemaker but then a tyrant and then a homemaker that goes to prison but I think you love her or you hate her and I think there's no two ways about it. But I think it comes down to the fantasy, Nancy, that you mentioned before is the fantasy that we all would like to be this perfect person.

And when you talk about "Desperate Housewives," you're talking about Brie (ph), the character Brie because I think that was patterned after Martha Stewart, right?

NAUGHTON: Yes, it was absolutely (UNINTELLIGIBLE).

GRACE: What do you think Henry, why so polarizing?

BLODGET: I think it's what was just discussed but I think also Martha has always played many different roles. She's been CEO. She's been the talent on the TV show. She's been this inspirational housewife figure or what have you, homemaker figure. And it's very hard to do any of those roles in isolation very well.

GRACE: Even just one of them.

BLODGET: And she's doing them all at the same time and it's so easy for people to criticize one aspect of that and confuse them and she's also been the brand of the company.

GRACE: Let's quickly go to Kareen Wynter. Kareen, was that a statement issued?

WYNTER: There was indeed, Nancy. At 12:30 a.m. Martha Stewart was officially released from Alderson having served her five month sentence. Let me read a little bit of what we have here in addition to what I just told you.

It says that she was actually sentenced in the Southern District of New York to a five month imprisonment for obstruction of justice. It just goes on to say that she will also be sentenced to a two-year term of supervised release, five months of which will be served in home confinement.

Again, at 12:30 a.m. Martha Stewart officially released from Alderson here. I can tell you that the prison guard out here, he had a smile on his face, the prison captain. He shook a few hands.

We saw a flurry of cars, a lot of activity go by. The lights are going off Nancy. It's been very, very difficult. We'll be pinpointing which vehicle she may be traveling in because it's moving in so quickly, some of the windows tinted but we do know now that she is a free woman.

GRACE: So, Kareen, she was in one of those vehicles we saw come out?

WYNTER: We believe so. It's very, very tricky. That's what we're hearing. We're waiting on official confirmation that she did indeed leave this route and it's incredible. It's actually hard to believe that she wouldn't because this is really the only exit out of here.

There's another exit but it's been closed off because of the snow. So, one of those vehicles perhaps Martha Stewart actually made her way out of here a few moments ago.

GRACE: OK, quick break everybody. We have been at Alderson waiting for Martha Stewart to be released tonight. She was supposed to be released at 12:01. She left the facility at 12:30. She is en route to Greenbrier Valley Airport in Lewisburg, West Virginia where we're all standing by waiting to see Martha Stewart take off for her new life. Stay with us.

(COMMERCIAL BREAK)

GRACE: Welcome back to LARRY KING LIVE.

We've got our eyes trained right here on Alderson Ladies Correctional Facility. Martha Stewart just released about ten minutes ago having served five months behind bars.

She's now headed to the local airport at Lewisburg, West Virginia where many people hope that she will give a statement. Then she will jet off on a private plane. We're waiting to see her.

Here in the studio with me, Keith Naughton from "NewsWeek." Keith, what preparations were made for her release?

NAUGHTON: Well, you know, the thing is she didn't want us to see her in those blue SUVs that sped out of the prison because reportedly she's had her hair stylist flown in.

Her daughter has been out at Bergdorf Goodman buying her new outfits because she's in a much smaller size now because she lost weight in prison. So, she wants to reemerge fully coiffed. She wants to put best face forward. She doesn't want to come out in her prison grays.

GRACE: How is she going to do that in the back of a car Jean?

CASAREZ: We may not see her tonight. We may not see her board that plane. If so, it will be a distant shot with maybe a head covering on her or something. She wants to look her best when she's before cameras.

GRACE: Well do you blame her?

CASAREZ: No.

GRACE: So, Henry, question to you if she wanted to could she head her organization?

BLODGET: I think my understanding now is that she is not -- she could still be CEO tomorrow. The SEC, the civil suit with the SEC, something the SEC could seek to bar her and I guess the question is she's in settlement talks perhaps to try to settle it and to try to get the SEC to agree to a shorter period of five years. CASAREZ: But, Nancy, let's take that a step farther. Let's say tomorrow she does a press conference and says "I am going to reclaim my title as CEO or director or as an officer," the SEC is going to be listening because they don't want that and they could jump to remove that stay and proceed with that civil action. So, I think she needs to be very careful.

GRACE: But do you think they will?

CASAREZ: I think they could.

GRACE: I mean the woman has already done jail time.

CASAREZ: True.

GRACE: I mean why beat a dead horse?

CASAREZ: But because you still have that legal matter and the SEC believes it's an important legal issue yet to be resolved, so I don't think they would like her and they would think it's the arrogance coming forward again.

NAUGHTON: The SEC sees an opportunity here to broaden the definition of insider trading with Martha Stewart's case, so she didn't get a tip directly from an executive. She got it from a stockbroker's assistant.

That's never been considered insider trading before. If they can get her to accept a deal on that, then they've just broadened the definition and they have greater power to police insider trading.

BLODGET: And that's much easier for them. I mean I don't think based on the people that I've talked to that it's such a lay up for the SEC to actually prove it, so they would like to see her settle and set the precedent that way.

GRACE: Look, having been a fed it takes them forever to move on anything so Stewart could probably do a somersault before they get around to drawing up a real complaint and moving forward with it.

Susan McDougal, did you hear this about Martha Stewart flying in a hairdresser and getting new clothes from Bergdorf Goodman? You walked out the door in your prison orange. You know, I wish you had had a hairstylist and a makeup person with you.

MCDOUGAL: Well, they say such awful things about women.

GRACE: They do.

MCDOUGAL: You know they talk about how much we weight, what we wear, what our hair looks like. They don't do that with men. So, of course, we're pretty touchy about it.

There was a headline in the paper in my home -- not my hometown but in the Capitol where the trial was that said a heavier Susan McDougal comes to trial. You know would they have done that with some guy?

And then when I went to jail and lost all the weight, you know, they just drove that into the ground about, you know, why is she so thin? What's going on with that? And I've never seen that done with any male inmate.

So, of course, she's touchy about it. I mean how many fat jokes do you have to hear about yourself before you want to, you know, look your best when you go on television?

I have 14 people here putting makeup on me, you know. I lived the orange and the no makeup and the, you know, hair growing out gray. It's an awful thing to be judged that harshly in a public light constantly and she's been in the eye, the glaring eye of this for such a long time. If for nothing else, we should just admire that she has made it through that with some dignity.

GRACE: You know, Kareen Wynter, that press statement that was given by the jail could you repeat that please?

WYNTER: It's very, very short but it sums up what we've been reporting here Nancy. At 12:30 a.m. Martha Stewart was released from prison here in West Virginia. It went on to say also that additionally she was sentenced to a two term -- two-year term of supervised released, five months of which will be served in home confinement.

I want to touch on something also, Nancy. Martha is embarking on her new life here but we can't forget about the lives that she's left behind here through her Web site over the last several months.

She's been quite specific on the fact that she's not only formed a close bond with a lot of her inmates but she's also been thinking about ways to help first time offenders. A lot of women who are in jail right now, perhaps on drug charges, Stewart says imprisoning them, keeping them behind bars is really not the way that they need to be rehabilitated.

So, that's something I wanted to touch on because while this is a time of celebration for Martha Stewart, her fans who were out here, there are many women who remain here and we should perhaps expect that Martha will be taking up that issue, speaking out publicly not just on her business ventures but also on reforming the system, perhaps prison reforms or sentencing.

GRACE: Reporting from Alderson is CNN reporter Kareen Wynter.

Also with us Deborah Feyerick at the airport where we expect Martha Stewart to take off at any moment, don't want to miss that. Stay with us.

(COMMERCIAL BREAK)

GRACE: Martha Stewart has been released from Alderson Ladies Facility. Let's go straight out to Deborah Feyerick of CNN. Deborah, what can you tell us? FEYERICK: Well, Nancy, talk about a coming out party. Her private jet just was brought out from the hangar seconds ago. You can hear the engine coming. That means that she's probably about ten to 15 minutes away. She was released at 12:30.

It's a 30-minute drive in the dark. You have to go a little bit slowly because the roads are a bit dangerous and certainly icy, especially in the current temperatures. But, again, that plane is waiting and, Nancy, that thing could not be more front and center, you know, if it had a bulls eye on it.

She's absolutely going to be making that statement that she is back. She has done her time and she's going to take the helm of her company once again. She can't do it legally necessarily just because there's the SEC motion against her right now but there's no question who is at the center of all of this attention right now -- Nancy.

GRACE: Now, why is that, Henry, that because of the SEC she cannot make that public statement that she's back and she's taking over, she's resuming her position?

BLODGET: I think she can. I mean I think my understanding is the SEC actually has to win the case against her to aggressively bar her.

GRACE: But if she were to make that announcement do you think they would proceed?

BLODGET: No. I think certainly there's some thought that you're just going to antagonize them.

GRACE: Right.

BLODGET: But I don't think (UNINTELLIGIBLE). The SEC has filed the case. It's out there. They may not be aggressively pursuing it right now because settlement talks are going on.

GRACE: Well, you know, it's not where you go it's how you get there. That is some sleigh she's got.

NAUGHTON: Look at that plane, it's incredible.

GRACE: That is a serious ride.

NAUGHTON: So, what does that say? You know it's so ostentatious.

GRACE: I don't know but I want to get on that.

CASAREZ: Here's the question I have. Is this the same plane that she was in when she touched down in San Antonio December of 2001 (UNINTELLIGIBLE) and made the phone call, the phone call that started it all?

GRACE: Good question. Hey, Deborah, this is some ride she's got going on. It looks like they washed it for the event. FEYERICK: Yes, that is one nice plane as a matter of fact and I'm sure it's fully stocked with whatever Martha Stewart might want for the two-hour ride to New York. Those were a couple of reporters who went onto the tarmac but, again, they're going to be moved out momentarily.

Again, this is -- she'll be on that plane for about two hours heading back up to New York. She's got to stay within the judicial district. That's the Southern District of New York. She was prosecuted in Manhattan but the Southern District also encompasses Westchester, which is where her estate will be.

She's got 72 hours before she gets in touch with her probation officer. There's every possibility that she could spend the night at her daughter Alexis' apartment but that's unlikely.

There are as many reporters camped out at her home in Deptford (ph) as there are here at the Greenbrier Valley Airport, so you can believe that when she finally does get into her bed tonight there will be a lot of cold people with cameras and microphones out waiting to see what her next move will be -- Nancy.

GRACE: You know, Deborah, you mentioned a probation officer. Jean, do you know exactly how much supervision will the probation officer actually exert on Martha Stewart?

CASAREZ: Well, at this point with the house arrest there has to be a schedule made up well in advance of what her weekly activities are going to be. That has to be turned in. It has to be scrutinized.

GRACE: Would you like to see that Day-Timer, the Day-Timer of Martha Stewart?

CASAREZ: Yes, and subjectively they make her decisions because, you know, is it a business decision to go to the Emmys, the daytime Emmys? Her show is up for some awards, so is that part of work? Can she do that but not attend the party afterwards? I mean a lot of subjective decisions the probation department will have to make.

GRACE: How does that work? What do you think will happen Henry?

BLODGET: You got me in terms of that. I mean I...

GRACE: Well, OK. Probation officers that I have dealt with are overburdened, overworked and burned out. They've got thousands of cases they've got to handle but I think they would give this one some special attention, thoughts Keith.

NAUGHTON: Yes, well I think that she is a special case and they'll want to drop by, you know, they'll want to drop by just because...

GRACE: Around dinner time.

NAUGHTON: ...she'll fix them some tea and scones.

GRACE: To do a spot check.

NAUGHTON: Absolutely. Absolutely, think of the goodies. I just keep looking at this plane and I think who's traveling with her, if anyone? You know we talked about earlier Alexis has visited her almost every weekend but her mother has been unable to visit her. She had visited her one time in the whole time that she's been in prison.

CASAREZ: Her dear mother.

NAUGHTON: You know who she's very close to and who...

CASAREZ: I think she's turned 90 now.

NAUGHTON: Yes, she's 90. In fact, they appeared together on LARRY KING LIVE.

GRACE: I remember that.

NAUGHTON: Big Martha they call her and little Martha is Martha Stewart. And I just wonder, you know when will that reunion happen and I be that will be a very emotional reunion.

CASAREZ: Oh, it will and you know, Nancy, her mother was on her show with her so much. In fact, all the recipes that were handed down in the family come from her mother and her mother was going to put together a cookbook and Martha was going to publish it. It hasn't happened yet but I hope it does.

GRACE: What about that brother of Martha Stewart that put some of their family items up for auction? There will be heck to pay tonight when she gets to a private phone. What do you think about that Henry?

BLODGET: That's the first time I've heard that.

GRACE: The Singer sewing machine that she used to make her wedding dress, several items, a rocking chair I believe, Jean, wasn't it?

CASAREZ: All from the Nutley, New Jersey home from where she grew up.

GRACE: Auction, everybody making a buck off Martha Stewart.

Let me go back to Deborah Feyerick. Deborah, I hear a lot of commotion there. What's going on?

FEYERICK: Well, mostly everybody is just waiting for Martha Stewart to get here. The plane just behind me, the engines are ready to go and the airport manager had told us when we were making inquiries as to when she would be released, how she would be released, he said, "Well, the plane would be ready by 12:01" and we sort of said, "Well what does that mean?" He said, "The plane will be ready by 12:01."

So there was no question in the airport's mind certainly that they were going to make every accommodation that they needed to, to make sure that she got out smoothly. Right now we're keeping our eyes open just to see when her vehicle will get here.

We don't know whether, in fact, she'll switch vehicles or whether she'll arrive in one of those blue vehicles that you saw bringing her out of prison. We believe that those are indeed the cars that she used. Right now, everybody just waiting. First it was at Alderson, now the momentum has shifted over here to the airport -- Nancy.

GRACE: Deborah, is anybody in the plane? Is her daughter there? Is anyone there to ride with her home?

FEYERICK: We don't know. We've been trying to confirm that for the last couple of minutes in terms of who might be aboard the plane. We don't know. We don't know whether her daughter Alexis went to Alderson to pick her up, just the way she was with her when she dropped her off.

We just right now we really just don't know. Things are being very carefully orchestrated so the kind of information that we're getting is coming out in sort of little bits and pieces but we will certainly try to find out over the course of the next couple of minutes.

GRACE: You know her magazine has suffered.

NAUGHTON: Absolutely.

GRACE: What's the likelihood it will take an upturn?

NAUGHTON: Well, I've talked to advertisers who say they are interested in coming back over the next six months and the company itself is predicting in the second quarter the ads will increase. So, you know, there is the prospect of that magazine finally getting a little fatter again but it's still just a wafer compared to the Oprah magazine or "Real Simple."

GRACE: Let's go straight back to Deborah Feyerick. We think Martha Stewart has arrived -- Deborah.

FEYERICK: She has indeed arrived at the airport. Nancy, she has arrived at the airport. We were just handed a statement, a handwritten statement that was Xeroxed and just handed out to some of the reporters here.

It says, "Martha Stewart has arrived on Greenbrier Valley Airport at this time. She will be boarding the airplane in four to 15 minutes." That's from Jerry O'Sullivan, the airport manager here at Greenbrier Valley Airport.

So, again, the convoy made it in pretty good time and so now we're just waiting for that million dollar shot, whether it will be a smile, a wave, a wink. What will she be wearing?

Those are all the questions that seem to fascinate people. Again, we'll have that answer as she leaves West Virginia. I don't know whether she'll ever be back but certainly she's leaving in style.

GRACE: So, what do you think about Dominick Dunne's report that she is writing a book? Will it be about her time behind bars? Will it be about the trial, what?

BLODGET: I would think that would be part of it. She made a lot of comments after the trial that she just had no idea what she was doing initially when she was questioned and how hard it was to get good advice and really understand sort of the gravity of the investigation. So, I'm sure there will be a lot of that and Martha is a wonderful teacher and certainly that's a book that a lot of people could benefit from over time.

GRACE: Keith.

NAUGHTON: Yes, I think it will be a serve and tell kind of book and that will be fascinating. What's life like inside if you're Martha Stewart and what can you learn from it? How can you become a better person.

GRACE: What do you think Jean? I predict a bestseller.

CASAREZ: Oh, I do but if it's too controversial would that be a good thing for her at this point of time? Should she go into the domestic area more, something that everybody can enjoy versus something that could provide (UNINTELLIGIBLE).

GRACE: The domestic side of Alderson?

CASAREZ: No, the domestic side of living back to what she does best.

GRACE: Don't you think she'll write about her trial and life behind bars?

CASAREZ: Yes and I think that's a good thing and I think she should incorporate that in her shows but if it's too controversial of a book, lashing out, I think that could be possibly a negative and (UNINTELLIGIBLE) people rather than bring them together.

NAUGHTON: But the drama of prison is what makes her story so compelling. That's what Jeff Zucker of NBC said to me and, you know, Burnett says in "The Apprentice" you'll hear about the prison sentence, probably in the setup in the same way you hear about Trump making a billion, losing it, and making it back again. You're going to hear about Martha's hard luck story, so that's going to be out there.

CASAREZ: And that makes her a sympathetic figure.

NAUGHTON: Yes.

GRACE: Deborah Feyerick, I heard some more commotion while we were talking, any change? Have you spotted Stewart?

FEYERICK: We were trying to spot Stewart. As a matter of fact, a car drove up to the gate and everybody turned their cameras around to see whether, in fact, that might be her. It was a light-colored car.

But there are different roads that she can take when she gets onto the airport property, so she may have basically swung wide and is just getting ready really to make this big debut.

That's what everybody is waiting for but, no, we don't know where the caravan is. We're looking around trying to get some sort of a clue. Again, time is counting down. It should be, according to this message, 12 minutes left to go before she boards that plane.

GRACE: Well, Deborah, she faked us out at Alderson, all right, so you're the last resort. Don't let her fake you out, OK, because we (UNINTELLIGIBLE).

FEYERICK: I'm holding the line.

GRACE: You're holding the line, OK. You know interesting and I understand why she didn't want to be photographed coming out of Alderson but now I'm surprised she's not giving a statement, Henry.

BLODGET: Well, I mean I think the point was made earlier right on and I think they're certainly not hiding the plane unless it's a decoy plane.

GRACE: A decoy plane, you mean she's got two? She's got two planes?

BLODGET: Focus on this one. Don't listen in the background.

GRACE: Do you think the daughter, do you think anyone is on the plane with her?

CASAREZ: My gut tells me her daughter is with her. Her daughter was with her the entire trial by her side every day, visited her almost every week in prison. I don't think her daughter would not be with her now.

NAUGHTON: What I was told when I was doing that cover story over and over again is Alexis is someone to watch. She didn't used to want to have anything to do with mom's company but she's someone to watch because now she is interested and down the road she could have a leadership role in that company.

GRACE: Now what changed?

NAUGHTON: I think she grew closer to her mother through this whole crisis and I think Alexis went out and proved herself. She had her own ventures and gyms and other aspects that went very well for her, so she's gone out. She's done it on her own. And now if she came to work at her mother's company it wouldn't be like she was just copying her mother. It would be like she was bringing something fresh to it.

GRACE: We are at Greenbrier Valley Airports, it's in Lewisburg, West Virginia, waiting for Martha Stewart. She has been released as of about an hour ago from Alderson Women's Correctional Facility. She is there at the airport and is about to fly home to New York to start her probation. Now what exactly will that entail? First, there's house arrest. Which one of her residences will she...

CASAREZ: The Bedford estate in New York, so I would assume that is exactly where she's going tonight. I don't think she can stop off at the daughter's apartment because house arrest is beginning, although she doesn't have the ankle bracelet on yet.

She's still serving her prison term, so to the home for five months and then supervised probation for another 17 -- 19 months, so two years altogether from today she'll be completely finished with everything.

GRACE: So, how does the ankle bracelet work? Is it monitored by your phone?

CASAREZ: It's monitored by phone lines, that's right, not satellites as we've seen before with satellites but it's on her ankle and it's monitored by phone lines. That's why there has to be a direct phone line between the federal prison and her house.

GRACE: And can she take it off?

CASAREZ: She cannot take it off.

GRACE: Guys, let's go to Deborah -- Deborah.

FEYERICK: Nancy, right behind me two trucks pulling up. As a matter of fact, I'm going to pull out, I'm going to step out so you can get a better look. We've got a number of cameras here and it does appear that she's in that car, the blue one there.

And this is interesting, Nancy. As you can see, they're not pulling up right to the gate. There's going to be at least, there's about 20 feet from the car to the door.

So there she is, Martha Stewart.

GRACE: Martha Stewart and she's with her daughter.

CASAREZ: Wearing a shawl and it looks like jeans.

GRACE: Deborah, she was stylish. She was radiant. She had a huge smile. I believe that was her daughter with her, right Deborah?

FEYERICK: That was her daughter. That's Alexis Stewart that's on that plane. As a matter of fact, we'll just keep the shot there of the door. We don't know whether anybody else is onboard. You can see some of her belongings most likely in that box, maybe some of the transcript that she's putting together.

We heard that she was doing a lot of typing in the prison library. She had a footlocker in her room, a footlocker actually near her bunk and that's all she was entitled to in terms of the belongings she was allowed to have. She didn't come with a lot.

Clearly, she's not leaving with a lot, though she is indeed leaving in style. Just take a look at that corporate jet and those things are pretty comfortable and usually they come fully stocked.

So, again, that's it. She looks happy. She looked rested and she looked young. She was wearing jeans it looked like, jeans and a shawl, my God, you know. There's something about not having to work 60, 70, 80 hours a day (sic). So now we're just waiting for the takeoff basically here at the airport.

GRACE: Deborah, I'm not fashion maven but I believe that was a very, very fashionable poncho that she was wearing.

CASAREZ: Nancy.

GRACE: What?

CASAREZ: I wonder if she knitted it herself. I wonder if she knitted it herself.

NAUGHTON: She looked very hip (UNINTELLIGIBLE).

GRACE: She looked very hip, hot and happening.

NAUGHTON: She did.

GRACE: I got to say she looked fantastic. She's a lean, mean fighting machine.

NAUGHTON: And I loved when she turned and did that wave.

FEYERICK: And what's interesting...

GRACE: What Deborah?

FEYERICK: You know and Nancy what I was going to say as well is that she just looked much more casual than we've seen her before. I mean granted, you know it is almost one o'clock on -- well it's one o'clock on Friday morning, so it's not as if she's going to dress up but, in fact, she just looked very relaxed and really started waving and smiling and looked warm.

I mean even throughout her whole trial, she never looked sort of warm and comfortable as she did right now. Maybe that's just part of the image makeover or maybe that indicates a real change.

GRACE: Martha Stewart is on her plane. I believe -- this is a shot of Stewart.

BLODGET: That we are going to see again and again and again.

GRACE: There she is. She emerged happy, smiling, with her daughter. Hi, Martha.

BLODGET: And here's the (UNINTELLIGIBLE). GRACE: Wave.

NAUGHTON: Yes, here it is.

BLODGET: That looks perky. That is a perky wave.

CASAREZ: Yes, it is.

BLODGET: She looks upbeat and perky.

GRACE: Well do you blame her? There's a little champagne cork popping inside that plane tonight, oh yes.

NAUGHTON: She looks fabulous.

GRACE: Yes, she did. She really did. So, long story short two- hour flight back to New York.

CASAREZ: In 72 hours she has to report to the probation department to be fitted with the ankle bracelet. Probation has to come out to the house to get the phone line and the receiver all set up and she starts house probation.

GRACE: Do you think she'll make a break for it in 72 hours?

CASAREZ: No.

GRACE: I mean she's got a private jet.

(CROSSTALK)

GRACE: Everybody you are seeing a live shot of Stewart's jet. She's about to take off from Greenbrier Valley Airport, Lewisburg, West Virginia to start a new chapter in her life.

She's been behind bars for five months, a long and tortuous trial and many people thought she had been targeted by a couple of federal prosecutors as a trophy defendant. While many people had accepted Stewart had made an inappropriate trade was she persecuted at trial?

And there she goes.

FEYERICK: And, Nancy it's interesting. It's sort of kicking up a cloud of dust here as the plane pulls away, a little bit symbolic there.

GRACE: There she goes everybody. You know what I've waited until 1:00 a.m. I want to see this plane take off. I guess I'll go to the New York airport and wait to see it land.

NAUGHTON: They orchestrated it and it worked.

GRACE: OK, you know what, they said she was down but she's not down and out. Martha Stewart making a comeback. There she goes everybody. We've waited up all night. She's free. She's back. We're going to see what happens now. This is a shot of Martha Stewart's jet. She was released around 12:30 a.m. from Camp Cupcake, Alderson Women's Correctional Facility after five months behind bars.

She apparently wrote a book and brought it on her plane in a huge box, accompanied by her daughter. It's slowly disappearing. Martha Stewart taking off for another chapter in her life.

Final thought.

NAUGHTON: Well, I think this is the triumph right here. This is the proof of the words she said last summer on those courthouse steps when she declared "I'll be back. I will be back."

GRACE: And here's Stewart emerging. This is the first sight of her outside prison walls for the last five months. No way was she going to show up in prison khaki.

You know I don't think I've ever seen anyone emerge from behind bars looking that good, Jean Casarez.

CASAREZ: You know it reminds me of young video that I've seen of her the bounce in her step. I haven't seen that bounce in a long time.

GRACE: Well, can you blame her?

CASAREZ: No.

GRACE: Henry.

BLODGET: Yes, she must be thrilled.

GRACE: This is a shot...

FEYERICK: Nancy.

GRACE: Go ahead Deborah.

FEYERICK: The one thing I was going to say and that is she almost seemed pleased and delighted when she heard supporters here at the airport calling out and cheering for her as she boarded that plane.

She heard that at the courthouse during her trial but there was such a seriousness, such a gravity about the whole thing that you never saw her even really smile that warmly to supporters. The fact that they came out at one o'clock on a very frigid West Virginia night seemed to make her happy.

GRACE: She has released a statement on her Web site stating "The experience of the last five months has been a life altering experience." Martha Stewart has already gotten online and released a statement.

I want to thank everyone that's been with me tonight, Deborah Feyerick, Susan McDougal, Henry Blodget, Jean Casarez, Keith Naughton and you for being with us.

I'm Nancy Grace signing off for Larry King tonight.

"PEOPLE IN THE NEWS" is in progress right now. Thank you for staying up late with us everybody. Good night.

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