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Criminal Charges Nearing for Martha Stewart

Aired June 03, 2003 - 13:01   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.


MILES O'BRIEN, ANCHOR: Martha Stewart could face criminal charges in the near future. That's the word from her media company, which says a U.S. attorney will seek an indictment against the domestic maven. Such a request will be made to a federal grand jury in New York.
And that's where we find CNN's Aaron Chernoff, who is watching the story for us. Hello, Aaron -- Allan.

ALLAN CHERNOFF, CNN CORRESPONDENT: Miles, a major face-off today between Martha Stewart and prosecutors here in New York. As you said, the prosecutors have warned Martha Stewart's lawyers that they are going to ask for an indictment from a grand jury and the Securities and Exchange Commission has told those lawyers it intends to bring civil charges against Martha Stewart.

On the other hand, Martha Stewart's attorney, Robert Morvillo, an old veteran of the federal system. He has released a statement saying, quote, "If Martha Stewart is indicted, she intends to declare her innocence and proceed to trial."

Now, this entire case stems from Martha Stewart's sale of nearly 4,000 shares of ImClone System stock, the company that has an experimental cancer drug. You'll recall Martha Stewart unloaded her stock for little more than $200,000, one day before the Food and Drug Administration rejected an application to approve Erbitux, the drug.

Now, there is speculation here that perhaps we will now have a plea bargain. There has certainly been a dance between the prosecution and between attorneys for Martha Stewart. The idea being thrown around is that perhaps Martha Stewart might plead to an obstruction of justice charge, in return for the Justice Department dropping any insider trading charges.

The incentives that Stewart would have, certainly, avoid a trial and avoid a possible jail sentence. On the other hand, the prosecutors would probably rather not bring an insider trading case, because those cases tend to be extremely difficult to prove in court. And attorneys are saying that this would be an especially difficult case, since she was not selling the stock of her own company, but selling the stock of ImClone Systems -- Miles.

O'BRIEN: Allan Chernoff in New York, thank you very much.

Richard Serafini is a former prosecutor for the Securities and Exchange Commission. He is now a defense attorney, specializing in white collar crime and civil fraud cases. He joins us from Miami to talk a little bit more about this.

Good to have you with us, Mr. Serafini.

RICHARD SERAFINI, FORMER SEC PROSECUTOR: Thank you.

O'BRIEN: First, on this issue of a plea bargain, if you were representing Martha Stewart, would you advise her to seek a deal?

SERAFINI: Well, it depends on what type of a deal you can seek. And obviously, if you can get a deal and you can avoid prison time, I think that would definitely be something worth exploring and trying to pull off.

I suspect in this case, though, the government is going to want something in return, maybe some cooperation against some other people in their investigation.

O'BRIEN: And so would that be something that might be a difficult thing for her to do? I'm curious, though, if, in fact she goes down the road toward a plea bargain , where that leaves her in her role at the company. How does the SEC view someone who faces and is perhaps convicted of such charges?

SERAFINI: Well, I think that it would probably number her days at her company. To have a convicted felon in a top management position, is certainly not something that the SEC would probably allow.

And I suspect that, however this works out, it's going to be likely that she is no longer associated with her company and will be, in fact, barred by the SEC from association with a publicly traded company.

O'BRIEN: So either way, Martha Stewart and her brand will part, you predict?

SERAFINI: I think -- yes, I think there's a very good likelihood of that happening.

O'BRIEN: All right. And what about the timing? Does it surprise you that this is happening right this moment?

SERAFINI: Not really. We've known that the investigation has been going on for some time. And a white collar investigation by the Justice Department or by the SEC is something that usually moves at a rather deliberate pace. So it's not really a surprise that it's happening now.

O'BRIEN: The slow wheels of justice. All right. Richard Serafini, who is a former attorney for the SEC, now a defense attorney, joining us from Miami. Thank you very much.

SERAFINI: Well, you're welcome, thank you.

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 June 3, 2003 - 13:01   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MILES O'BRIEN, ANCHOR: Martha Stewart could face criminal charges in the near future. That's the word from her media company, which says a U.S. attorney will seek an indictment against the domestic maven. Such a request will be made to a federal grand jury in New York.
And that's where we find CNN's Aaron Chernoff, who is watching the story for us. Hello, Aaron -- Allan.

ALLAN CHERNOFF, CNN CORRESPONDENT: Miles, a major face-off today between Martha Stewart and prosecutors here in New York. As you said, the prosecutors have warned Martha Stewart's lawyers that they are going to ask for an indictment from a grand jury and the Securities and Exchange Commission has told those lawyers it intends to bring civil charges against Martha Stewart.

On the other hand, Martha Stewart's attorney, Robert Morvillo, an old veteran of the federal system. He has released a statement saying, quote, "If Martha Stewart is indicted, she intends to declare her innocence and proceed to trial."

Now, this entire case stems from Martha Stewart's sale of nearly 4,000 shares of ImClone System stock, the company that has an experimental cancer drug. You'll recall Martha Stewart unloaded her stock for little more than $200,000, one day before the Food and Drug Administration rejected an application to approve Erbitux, the drug.

Now, there is speculation here that perhaps we will now have a plea bargain. There has certainly been a dance between the prosecution and between attorneys for Martha Stewart. The idea being thrown around is that perhaps Martha Stewart might plead to an obstruction of justice charge, in return for the Justice Department dropping any insider trading charges.

The incentives that Stewart would have, certainly, avoid a trial and avoid a possible jail sentence. On the other hand, the prosecutors would probably rather not bring an insider trading case, because those cases tend to be extremely difficult to prove in court. And attorneys are saying that this would be an especially difficult case, since she was not selling the stock of her own company, but selling the stock of ImClone Systems -- Miles.

O'BRIEN: Allan Chernoff in New York, thank you very much.

Richard Serafini is a former prosecutor for the Securities and Exchange Commission. He is now a defense attorney, specializing in white collar crime and civil fraud cases. He joins us from Miami to talk a little bit more about this.

Good to have you with us, Mr. Serafini.

RICHARD SERAFINI, FORMER SEC PROSECUTOR: Thank you.

O'BRIEN: First, on this issue of a plea bargain, if you were representing Martha Stewart, would you advise her to seek a deal?

SERAFINI: Well, it depends on what type of a deal you can seek. And obviously, if you can get a deal and you can avoid prison time, I think that would definitely be something worth exploring and trying to pull off.

I suspect in this case, though, the government is going to want something in return, maybe some cooperation against some other people in their investigation.

O'BRIEN: And so would that be something that might be a difficult thing for her to do? I'm curious, though, if, in fact she goes down the road toward a plea bargain , where that leaves her in her role at the company. How does the SEC view someone who faces and is perhaps convicted of such charges?

SERAFINI: Well, I think that it would probably number her days at her company. To have a convicted felon in a top management position, is certainly not something that the SEC would probably allow.

And I suspect that, however this works out, it's going to be likely that she is no longer associated with her company and will be, in fact, barred by the SEC from association with a publicly traded company.

O'BRIEN: So either way, Martha Stewart and her brand will part, you predict?

SERAFINI: I think -- yes, I think there's a very good likelihood of that happening.

O'BRIEN: All right. And what about the timing? Does it surprise you that this is happening right this moment?

SERAFINI: Not really. We've known that the investigation has been going on for some time. And a white collar investigation by the Justice Department or by the SEC is something that usually moves at a rather deliberate pace. So it's not really a surprise that it's happening now.

O'BRIEN: The slow wheels of justice. All right. Richard Serafini, who is a former attorney for the SEC, now a defense attorney, joining us from Miami. Thank you very much.

SERAFINI: Well, you're welcome, thank you.

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