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Stewart has Pre-Sentence Probation Meeting While Board Gathers to Contemplate Possible Corporate Divorce

Aired March 08, 2004 - 14:00   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.


KYRA PHILLIPS, CNN ANCHOR: From the CNN Center in Atlanta, I'm Kyra Phillips. This hour of CNN's LIVE FROM starts right now.
Shoes are still falling on the heels of Martha Stewart's obstruction conviction in federal courts. The homemaking diva was back at the New York courthouse today for a pre-sentence probation meeting, while her own board gathered to contemplate a possible corporate divorce.

And then there is the verdict by Viacom, pulling the plug on Stewart's TV show on its CBS and UPN stations. We get the latest from CNN's Mary Snow. She's in Manhattan -- Mary.

MARY SNOW, CNN CORRESPONDENT: Kyra, Martha Stewart showed up at a federal courthouse today to report to the probation office, as has been instructed by the judge late Friday.

Martha Stewart was dressed in black, accompanied by her lead attorney, Robert Morvillo. She was there for roughly an hour. This is all part of that pre-sentencing process, routine, where probation officers routinely take information, personal information, for example. Also financial information, because in this case there could be fines involved.

And what legal experts say is that oftentimes, this kind of process can involve home visits which are to come.

The judge has set June 17 as the sentencing date and a report will be given to the judge before the sentencing. Emerging from the courthouse, Martha Stewart carrying an umbrella bearing the name of her company, Martha Stewart Living, didn't really have much to say to the crowd of reporters waiting for her.

But she did have a statement about her company saying: "It's a very good company," a person familiar with the situation saying the company's affairs and its strategy very much on the mind of Martha Stewart.

Over the weekend she was said to have a number of telephone calls with attorneys and this source saying that really the company strategy seemed to be her main focus. And, Kyra, part of that business strategy, the TV show that she has, Viacom today confirming that it has been canceled on both the CBS and UPN networks.

Now, arriving separately today was Peter Bacanovic, her former stockbroker, who was also convicted on Friday. Like Stewart, he does not have a criminal history. Legal experts say that they would be eligible for the minimum sentence and that legal experts say that sentence for Stewart to be roughly between 12 and 18 months -- Kyra.

PHILLIPS: Mary Snow live from Manhattan, thank you.

And just ahead I'll talk with a former attorney and federal prison inmate who will tell us what life would be like for Martha Stewart behind bars.

The ink is dry. The deal is sealed but reservations remain. This was signing day in new Iraq, a twice delayed ratification of an interim constitution details of which we get from CNN's Ben Wedeman. He's in Baghdad -- Ben.

(BEGIN VIDEOTAPE)

BEN WEDEMAN, CNN CORRESPONDENT: They finally signed it, a week late but better late than never. In the early afternoon here in Baghdad, the 25 members of the Iraqi Governing Council put aside their very public differences and signed Iraq's interim constitution.

Now council members describe this document as one of the most progressive constitutions in the region creating a federal democratic and pluralistic framework upon which to build a new Iraqi government. Iraq's foreign minister said it is a new beginning.

HOSHYAR ZEBARI, IRAQI FOREIGN MINISTER: It's of major significance especially it's a new beginning for Iraq. It is the -- it's the beginning of rebuilding the Iraqi state on a new basis, a new tenet, state of laws, state of democratic institutions, a state of equality, state of bill of rights. I think this framework is essential for rebuilding Iraq.

WEDEMAN: But already complications are emerging. Just hours after the document was signed, the Grand Ayatollah Ali al Sistani probably one of the most powerful figures among Iraq's Shiites said that he has reservations about the document saying it will make efforts to write up a permanent constitution ever more difficult. He said that the interim constitution should be approved by a nationally elected assembly.

Elsewhere in Baghdad more violence, in this case a rocket attack on a home near a police patrol station. Four people were wounded, including two children.

I'm Ben Wedeman, CNN reporting from Baghdad.

(END VIDEOTAPE)

PHILLIPS: Now to Haiti. There are about 1,700 American troops there trying to maintain order following the departure of former President Jean-Bertrand Aristide. Aristide fled to the central African republic but in his first news conference since leaving Haiti, Aristide still claims the presidency and he insists the U.S. forced him out of that country. (BEGIN VIDEO CLIP)

JEAN-BERTRAND ARISTIDE, FORMER HAITIAN PRESIDENT (through translator): In order for peace to reign one must speak the truth and that is why I have spoken of political abduction. Others might talk about a coup d'etat but the fact is that there was a political abduction and this unfortunately has paved the way for occupation and in the name of peace we launch an appeal for peaceful resistance.

(END VIDEO CLIP)

PHILLIPS: It has been anything but peaceful in Port-au-Prince. Weekend celebrations turned deadly as protesters clashed with Aristide supporters. Seven people were killed.

Back in the U.S., Democratic president hopeful John Kerry says he has enthusiastic support from some foreign leaders who want him to win in November. Kerry tells supporters there's enormous energy among those leaders who want President Bush out of office.

Kerry wades deep into chad country today extending his four day southern foray deep into Florida with stops in West Palm Beach, Hollywood and Tampa. Democratic contests get underway tomorrow in that state, Louisiana, Mississippi and Texas.

Both Kerry and President Bush are paying a lot of attention to the Latino vote. It's one of the fastest growing segments of the American electorate and, in Florida much of the focus is on Cuban Americans.

CNN's John Zarrella joins us now from Miami -- hi, John.

JOHN ZARRELLA, CNN MIAMI BUREAU CHIEF: Hi, Kyra.

That's exactly right. The Cuban-American vote has historically gone for the Republican Party. President Bush getting some 80-plus percent four years ago of the Cuban-American vote here but there's no guarantee that he'll get that kind of a percentage this time around.

There's been some erosion in his popularity among the Cuban- Americans who say he has not fulfilled promises of 2000 regarding Fidel Castro, not been tough enough with Fidel Castro.

And, you know, indicative of the fight the president has on his hands, Kyra, is a poll that just came out yesterday, a "Miami Herald" and St. Pete "Times" poll of 800 likely voters here in Florida giving Senator John Kerry a 49 to 43 lead right now over the president here.

But, of course, it's very early, eight months away and the experts are saying, Kyra, that they expect it to flip flop back and forth several times before all is said and done next November but everybody is clearly saying this state is in play. It's a battleground state. It will probably go down to the wire come November -- Kyra.

PHILLIPS: All right, John, after the hanging chad chaos, a lot of money, a lot of plans, a lot of things were supposed to go into process to fix the voting operations before this election. Will it happen? Did it happen? What's the latest?

ZARRELLA: Well, a lot of money was spent but apparently not quite enough. In about 15 counties that had these electronic voting machines, particularly Miami, Dade, Broward and Palm Beach Counties which were the big states during the 2000 recount.

Those, they don't have printers here in Dade and Broward Counties for those machines, so the problem is that there is still no physical way, according to a lot of the people here, you know, to actually count the ballots.

And Congressman Robert Wexler is saying that if there's a problem with the voting machines you can't go back and do a recount, which is against Florida law.

So, he is going to file a federal lawsuit, in fact announcing that today and that federal lawsuit demanding that printers be purchased so that there can be some paper trail in case there are problems or in case there is a close election because, as he says, there's no such thing as an infallible machine -- Kyra.

PHILLIPS: Paper trial versus hanging paper, John Zarrella in Miami, thanks John.

President Bush takes his campaign home to Texas, stumping in two cities ahead of that state's primary. In Dallas this morning, he took on Senator Kerry's voting record spotlighting a 1995 bill that Kerry sponsored to trim intelligence spending. Later today the president kicks up some dust at the Houston Livestock Show and Rodeo Show before attending a fund raiser.

Other news across America now, the search is resumed for three people missing in Baltimore's inner harbor following a weekend water taxi accident. Crews are combing the murky waters for a man and a woman and a 6-year-old boy. The water taxi overturned Saturday during a sudden squall. One person died, five people remain hospitalized.

Ernest Nelson tells the "L.A. Times" he cut up hundreds of cadavers and sold body parts to research labs but he insists UCLA officials knew all about it. The university lawyer says the allegation is ridiculous. Nelson and Henry Reed (ph), the director of the university's will body program are now under arrest.

And by the end of the day, Luz Cuevas will take custody of her 6- year-old daughter. The child was kidnapped when she was just ten days old. A family acquaintance is charged with the crime and, yes, Cuevas has been swamped with TV movie offers.

Straight ahead if Martha Stewart goes to jail will she be cleaning toilets or working in a prison laundry? A lawyer who has also done time says prison won't exactly be Club Fed even for a star inmate.

Trapped in a snow cave, boy scouts practicing survival skills put them to use on a weekend outing.

And if your budget is lean but your body is not, Dr. Sanjay Gupta will show you how to build a home gym without breaking the bank.

ANNOUNCER: You're watching LIVE FROM with Kyra Phillips.

(COMMERCIAL BREAK)

(WEATHER FORECAST)

(COMMERCIAL BREAK)

PHILLIPS: Well, experts tell us the worst. Martha Stewart can expect to spend a year or two in federal prison for lying about that ImClone stock sale. That's not to say it will be easy.

They myth of Club Fed that leaves a harsh, even violent reality says attorney turned white collar felon turned inmate advocate Karen Bonds. She joins us live from Columbus, Ohio, Karen good to see you.

KAREN BONDS, FMR. FEDERAL PRISONER: Thank you.

PHILLIPS: Well, first of all, set this up for us. How did you end up in federal prison?

BONDS: As a result of an interstate securities fraud, mismanagement of client funds, as a result of a head injury that exacerbated a bipolar disorder that we didn't know existed led to very poor judgment making on my part and, as a result, mismanagement of the client funds. So, yes, I did what they said I did.

PHILLIPS: Wow. So, there you were in prison. Set the scene for us. What was it like and is it going to be kosher for, you know, Martha Stewart who has star power?

BONDS: No. It's not going to be a good atmosphere. It's a very hostile atmosphere, a very tense atmosphere, a lot of things going on inside the prison culture that will be totally foreign to her.

She's going to have no control over anything except what she thinks because the Bureau of Prisons is going to tell her where to go, what to do, when to be there, what to wear, where to sleep. All aspects of her life will be controlled by them.

PHILLIPS: What happened to you? It's not necessarily a non- violent atmosphere is it?

BONDS: No, it's not. I was assaulted by another prisoner and beaten and I had a fractured shoulder, a concussion, pretty much looked like Mike Tyson after a prize fight. It was not a pretty picture.

PHILLIPS: So, a lot of people have this I guess idea that for people like Martha Stewart or Sam Waksal that, you know, they're treated differently in prison that it's sort of -- that the white collar prison inmate is different from others but you're saying that that's not necessarily true.

BONDS: That's very much untrue because the prison population is a whole mix, a cross-section of society. Only about five to six percent of the prison population are white collar criminals in the Club Feds now.

The other 90-some percent are typically drug offenses. So, no, you're not isolated. You're not in a cushy atmosphere and you're in a dangerous atmosphere.

PHILLIPS: And this was the same jail that Leona Helmsley went to also, right?

BONDS: That's right. Leona was at FBC Lexington and then was transferred to FBC Danbury.

PHILLIPS: So, you think Martha is going to get harassed?

BONDS: Oh, without a doubt. Any white collar female going into prison is going to be the target of not only other prisoners but also she's going to be treated with contempt by the guards because, quite frankly, they'll never achieve her level of success working for the Bureau of Prisons.

PHILLIPS: What will her duties entail?

BONDS: She could work in the kitchen. She could work in landscaping. She could work as an orderly cleaning the bathrooms. They're all very menial tasks. There's nothing creative, nothing that requires a brain, just manual labor.

PHILLIPS: All right and I'm not trying to be insensitive here but you mentioned landscaping, all right. Let's look at her background. Let's look where her talents are. Is it possible that she could get in there and start doing something like that and all of a sudden gain the respect of other inmates, somehow develop a bond through what she knows best?

BONDS: Well, what she knows best doesn't apply here because in landscaping you push a lawnmower or use a weed trimmer. There's no creativity involved, no landscaping. That's just another name for grass pushing.

PHILLIPS: There's no beautifying in this prison?

BONDS: There is no beautifying America or the Bureau of Prisons?

PHILLIPS: So, let me ask you then as a female, as someone who didn't have this extensive long criminal record, being side-by-side with others who had, was this a wakeup call for you? Did you at any point sit there or was it afterwards when you got out saying to yourself I will never commit financial fraud again?

BONDS: It was more like being in the middle of a hurricane or a train wreck or some natural disaster to end up there. It was a traumatic experience and to say it isn't, anyone that tells you that you can get by OK, they're not telling you the full truth.

PHILLIPS: Are we talking psychological punishment here more than anything else?

BONDS: Yes. A large part of it is psychological punishment and it's something you never escape. You never get past it.

PHILLIPS: I've got to ask you your advice to Martha Stewart.

BONDS: Make sure that in the next couple of months that you spend all the time you can with your daughter, your mother, your family and learn a little humility and kindness and gentleness and, for Heaven sakes, learn to not speak your mind when you get to prison if you end up there.

PHILLIPS: Very interesting. Did you ever speak your mind, Karen, when you were in there?

BONDS: Yes, I did not that anyone ever paid any attention to me but, yes, I was quite verbal about what I observed that when I saw a Bureau of Prisons employee doing something that did not -- was outside the confines of the rules that they were to be conducting themselves by, I didn't hesitate to point that out to them. So, no, I wasn't popular.

PHILLIPS: Who were some of your fellow inmates, any big names?

BONDS: Nobody who would probably be recognized on a national level that was there. There was a lot of white collars. There were a lot of, you know, drug dealers, a lot of doctors, lawyers, psychologists, bankers and then there was a lot of, you know, very low level people who were maybe just housewives with not even a GED.

PHILLIPS: Well now you've come out. You're an attorney. You're an inmate advocate, why?

BONDS: Because things need to change in the federal prison system. There's very little rehabilitational programming going on and it's my goal to see that Congress in America is educated about the reality of the federal prison system and we're doing that.

A lot of the information on the Web site, www.fppr.us, a wealth of information about the reform activities in the federal prison system there, it needs to be done.

PHILLIPS: And just running your name on the Internet it's interesting to see all the things that you've gotten involved with. Karen, it's an interesting story. You definitely give us a different twist today. We appreciate your time.

BONDS: You're quite welcome.

PHILLIPS: Well, he's gone. Talk about a different twist, he's gone from homeless shelter to the California Boxing Hall of Fame. In just a few minutes we're going to talk with boxing great Ernie Lopez, "Indian Red," in the house talking about his amazing journey. And the journey of 1,000 miles is just starting out for these, you know, about the Iditarod. We're going to take you to that dog sled race straight ahead.

RHONDA SCHAFFLER, CNN FINANCIAL NEWS CORRESPONDENT: I'm Rhonda Schaffler live from the New York Stock Exchange. Business travelers also making more journeys and hotel companies are saying welcome back. I'll have that story when LIVE FROM returns right after this break.

(COMMERCIAL BREAK)

PHILLIPS: Arnold Schwarzenegger flexing his multi-tasking muscle in a big way. The bodybuilder actor turned California (AUDIO GAP) editor of two magazines. Our Miguel Marquez reports.

(BEGIN VIDEOTAPE)

MIGUEL MARQUEZ, CNN CORRESPONDENT (voice-over): The California celebrity governor says he has another job.

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I'm announcing here today that I will be from now on the executive editor of "Muscle and Fitness" and "Flex" magazine, is that a good move or what, huh?

MARQUEZ: A good move, not so much says political science Professor Raph Sonenshein.

RAPHAEL SONENSHEIN, CALIFORNIA STATE FULLERTON: It's not the greatest time in the world to go out and get another job. You got the bond markets watching California that's just decided to borrow $27 billion. If ever there was a time to say let's prove we're serious about the budget and getting down to the budget this is it.

MARQUEZ: Schwarzenegger has written a guest column for ten years in "Muscle and Fitness," was friends with the magazine's previous owner Joe Weider and has appeared on the covers of both magazines a total of 50 times.

"Muscle and Fitness" and "Flex" are owned by the same company that owns the "National Enquirer" and "Star." In the two months leading up to the recall, Schwarzenegger never made the cover of either magazine and was only mentioned twice, once negative, once positive.

SONENSHEIN: They laid off him completely. There were questions raised at the time about what arrangements there may or may not have been between the governor and his allies and those magazines, so it's already an issue and now he's basically on staff.

MARQUEZ (on camera): A spokesman for Governor Schwarzenegger says Schwarzenegger sees no conflict of interest here that this is simply about fitness.

Neither the "National Enquirer" nor "Star" would comment about their editorial practices but a public relations representative for American Media says Schwarzenegger got no special treatment during the recall and his new position will have no impact on the editorial integrity of the company's other publications.

Miguel Marquez, CNN, Los Angeles.

(END VIDEOTAPE)

PHILLIPS: Well, business travel is making a comeback and hotels are ready to take advantage of the increased demand by jacking up the prices. Rhonda Schaffler joins us live from the New York Stock Exchange with that story -- Rhonda.

SCHAFFLER: Hi there, Kyra.

They apparently saw their opening because it has been three dismal years for the hotel business and now we're told demand is rising at an extraordinary pace. That's because the business travelers are back. They're out there traveling.

Thanks to the economic upswing, employers have started relaxing their travel policies allowing employees to schedule more face-to-face meetings and they're letting workers shell out big bucks to stay at luxury hotels but as occupancy rates rise so do prices.

According to accounting firm Price Waterhouse Coopers, hotel demand will increase nearly five percent this year and average daily rates for upscale hotels will rise to about $140 a night and that is up 1.9 percent from last year's average. Most of the boost is coming from U.S. business travelers but international travelers are also returning. They're lured in part by the weak dollar -- Kyra.

PHILLIPS: All right, well it looks like the Pillsbury Dough Boy is in a real jam, what's the story?

SCHAFFLER: A match made in heaven I guess. J.M. Smucker, which is known for jam and jelly is buying International Multi Foods. It is a deal worth more than $800 million. International Multi Foods is the name behind Pillsbury cake mixes and dough and Hungry Man pancake mix.

How are investors reacting to this? Well, Smucker stock down about four percent but International Multi Foods stock is rising 25 percent, not so for the overall market though.

Stocks heading lower now. The Dow Jones Industrial Average off 26 points and the NASDAQ is down more than one percent. That is the latest news from Wall Street.

Coming up, the credit crunch more people are struggling to pay the minimum on their credit cards. I'll have that story when LIVE FROM rolls on right after this break.

(COMMERCIAL BREAK)

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Gathers to Contemplate Possible Corporate Divorce>


Aired March 8, 2004 - 14:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: From the CNN Center in Atlanta, I'm Kyra Phillips. This hour of CNN's LIVE FROM starts right now.
Shoes are still falling on the heels of Martha Stewart's obstruction conviction in federal courts. The homemaking diva was back at the New York courthouse today for a pre-sentence probation meeting, while her own board gathered to contemplate a possible corporate divorce.

And then there is the verdict by Viacom, pulling the plug on Stewart's TV show on its CBS and UPN stations. We get the latest from CNN's Mary Snow. She's in Manhattan -- Mary.

MARY SNOW, CNN CORRESPONDENT: Kyra, Martha Stewart showed up at a federal courthouse today to report to the probation office, as has been instructed by the judge late Friday.

Martha Stewart was dressed in black, accompanied by her lead attorney, Robert Morvillo. She was there for roughly an hour. This is all part of that pre-sentencing process, routine, where probation officers routinely take information, personal information, for example. Also financial information, because in this case there could be fines involved.

And what legal experts say is that oftentimes, this kind of process can involve home visits which are to come.

The judge has set June 17 as the sentencing date and a report will be given to the judge before the sentencing. Emerging from the courthouse, Martha Stewart carrying an umbrella bearing the name of her company, Martha Stewart Living, didn't really have much to say to the crowd of reporters waiting for her.

But she did have a statement about her company saying: "It's a very good company," a person familiar with the situation saying the company's affairs and its strategy very much on the mind of Martha Stewart.

Over the weekend she was said to have a number of telephone calls with attorneys and this source saying that really the company strategy seemed to be her main focus. And, Kyra, part of that business strategy, the TV show that she has, Viacom today confirming that it has been canceled on both the CBS and UPN networks.

Now, arriving separately today was Peter Bacanovic, her former stockbroker, who was also convicted on Friday. Like Stewart, he does not have a criminal history. Legal experts say that they would be eligible for the minimum sentence and that legal experts say that sentence for Stewart to be roughly between 12 and 18 months -- Kyra.

PHILLIPS: Mary Snow live from Manhattan, thank you.

And just ahead I'll talk with a former attorney and federal prison inmate who will tell us what life would be like for Martha Stewart behind bars.

The ink is dry. The deal is sealed but reservations remain. This was signing day in new Iraq, a twice delayed ratification of an interim constitution details of which we get from CNN's Ben Wedeman. He's in Baghdad -- Ben.

(BEGIN VIDEOTAPE)

BEN WEDEMAN, CNN CORRESPONDENT: They finally signed it, a week late but better late than never. In the early afternoon here in Baghdad, the 25 members of the Iraqi Governing Council put aside their very public differences and signed Iraq's interim constitution.

Now council members describe this document as one of the most progressive constitutions in the region creating a federal democratic and pluralistic framework upon which to build a new Iraqi government. Iraq's foreign minister said it is a new beginning.

HOSHYAR ZEBARI, IRAQI FOREIGN MINISTER: It's of major significance especially it's a new beginning for Iraq. It is the -- it's the beginning of rebuilding the Iraqi state on a new basis, a new tenet, state of laws, state of democratic institutions, a state of equality, state of bill of rights. I think this framework is essential for rebuilding Iraq.

WEDEMAN: But already complications are emerging. Just hours after the document was signed, the Grand Ayatollah Ali al Sistani probably one of the most powerful figures among Iraq's Shiites said that he has reservations about the document saying it will make efforts to write up a permanent constitution ever more difficult. He said that the interim constitution should be approved by a nationally elected assembly.

Elsewhere in Baghdad more violence, in this case a rocket attack on a home near a police patrol station. Four people were wounded, including two children.

I'm Ben Wedeman, CNN reporting from Baghdad.

(END VIDEOTAPE)

PHILLIPS: Now to Haiti. There are about 1,700 American troops there trying to maintain order following the departure of former President Jean-Bertrand Aristide. Aristide fled to the central African republic but in his first news conference since leaving Haiti, Aristide still claims the presidency and he insists the U.S. forced him out of that country. (BEGIN VIDEO CLIP)

JEAN-BERTRAND ARISTIDE, FORMER HAITIAN PRESIDENT (through translator): In order for peace to reign one must speak the truth and that is why I have spoken of political abduction. Others might talk about a coup d'etat but the fact is that there was a political abduction and this unfortunately has paved the way for occupation and in the name of peace we launch an appeal for peaceful resistance.

(END VIDEO CLIP)

PHILLIPS: It has been anything but peaceful in Port-au-Prince. Weekend celebrations turned deadly as protesters clashed with Aristide supporters. Seven people were killed.

Back in the U.S., Democratic president hopeful John Kerry says he has enthusiastic support from some foreign leaders who want him to win in November. Kerry tells supporters there's enormous energy among those leaders who want President Bush out of office.

Kerry wades deep into chad country today extending his four day southern foray deep into Florida with stops in West Palm Beach, Hollywood and Tampa. Democratic contests get underway tomorrow in that state, Louisiana, Mississippi and Texas.

Both Kerry and President Bush are paying a lot of attention to the Latino vote. It's one of the fastest growing segments of the American electorate and, in Florida much of the focus is on Cuban Americans.

CNN's John Zarrella joins us now from Miami -- hi, John.

JOHN ZARRELLA, CNN MIAMI BUREAU CHIEF: Hi, Kyra.

That's exactly right. The Cuban-American vote has historically gone for the Republican Party. President Bush getting some 80-plus percent four years ago of the Cuban-American vote here but there's no guarantee that he'll get that kind of a percentage this time around.

There's been some erosion in his popularity among the Cuban- Americans who say he has not fulfilled promises of 2000 regarding Fidel Castro, not been tough enough with Fidel Castro.

And, you know, indicative of the fight the president has on his hands, Kyra, is a poll that just came out yesterday, a "Miami Herald" and St. Pete "Times" poll of 800 likely voters here in Florida giving Senator John Kerry a 49 to 43 lead right now over the president here.

But, of course, it's very early, eight months away and the experts are saying, Kyra, that they expect it to flip flop back and forth several times before all is said and done next November but everybody is clearly saying this state is in play. It's a battleground state. It will probably go down to the wire come November -- Kyra.

PHILLIPS: All right, John, after the hanging chad chaos, a lot of money, a lot of plans, a lot of things were supposed to go into process to fix the voting operations before this election. Will it happen? Did it happen? What's the latest?

ZARRELLA: Well, a lot of money was spent but apparently not quite enough. In about 15 counties that had these electronic voting machines, particularly Miami, Dade, Broward and Palm Beach Counties which were the big states during the 2000 recount.

Those, they don't have printers here in Dade and Broward Counties for those machines, so the problem is that there is still no physical way, according to a lot of the people here, you know, to actually count the ballots.

And Congressman Robert Wexler is saying that if there's a problem with the voting machines you can't go back and do a recount, which is against Florida law.

So, he is going to file a federal lawsuit, in fact announcing that today and that federal lawsuit demanding that printers be purchased so that there can be some paper trail in case there are problems or in case there is a close election because, as he says, there's no such thing as an infallible machine -- Kyra.

PHILLIPS: Paper trial versus hanging paper, John Zarrella in Miami, thanks John.

President Bush takes his campaign home to Texas, stumping in two cities ahead of that state's primary. In Dallas this morning, he took on Senator Kerry's voting record spotlighting a 1995 bill that Kerry sponsored to trim intelligence spending. Later today the president kicks up some dust at the Houston Livestock Show and Rodeo Show before attending a fund raiser.

Other news across America now, the search is resumed for three people missing in Baltimore's inner harbor following a weekend water taxi accident. Crews are combing the murky waters for a man and a woman and a 6-year-old boy. The water taxi overturned Saturday during a sudden squall. One person died, five people remain hospitalized.

Ernest Nelson tells the "L.A. Times" he cut up hundreds of cadavers and sold body parts to research labs but he insists UCLA officials knew all about it. The university lawyer says the allegation is ridiculous. Nelson and Henry Reed (ph), the director of the university's will body program are now under arrest.

And by the end of the day, Luz Cuevas will take custody of her 6- year-old daughter. The child was kidnapped when she was just ten days old. A family acquaintance is charged with the crime and, yes, Cuevas has been swamped with TV movie offers.

Straight ahead if Martha Stewart goes to jail will she be cleaning toilets or working in a prison laundry? A lawyer who has also done time says prison won't exactly be Club Fed even for a star inmate.

Trapped in a snow cave, boy scouts practicing survival skills put them to use on a weekend outing.

And if your budget is lean but your body is not, Dr. Sanjay Gupta will show you how to build a home gym without breaking the bank.

ANNOUNCER: You're watching LIVE FROM with Kyra Phillips.

(COMMERCIAL BREAK)

(WEATHER FORECAST)

(COMMERCIAL BREAK)

PHILLIPS: Well, experts tell us the worst. Martha Stewart can expect to spend a year or two in federal prison for lying about that ImClone stock sale. That's not to say it will be easy.

They myth of Club Fed that leaves a harsh, even violent reality says attorney turned white collar felon turned inmate advocate Karen Bonds. She joins us live from Columbus, Ohio, Karen good to see you.

KAREN BONDS, FMR. FEDERAL PRISONER: Thank you.

PHILLIPS: Well, first of all, set this up for us. How did you end up in federal prison?

BONDS: As a result of an interstate securities fraud, mismanagement of client funds, as a result of a head injury that exacerbated a bipolar disorder that we didn't know existed led to very poor judgment making on my part and, as a result, mismanagement of the client funds. So, yes, I did what they said I did.

PHILLIPS: Wow. So, there you were in prison. Set the scene for us. What was it like and is it going to be kosher for, you know, Martha Stewart who has star power?

BONDS: No. It's not going to be a good atmosphere. It's a very hostile atmosphere, a very tense atmosphere, a lot of things going on inside the prison culture that will be totally foreign to her.

She's going to have no control over anything except what she thinks because the Bureau of Prisons is going to tell her where to go, what to do, when to be there, what to wear, where to sleep. All aspects of her life will be controlled by them.

PHILLIPS: What happened to you? It's not necessarily a non- violent atmosphere is it?

BONDS: No, it's not. I was assaulted by another prisoner and beaten and I had a fractured shoulder, a concussion, pretty much looked like Mike Tyson after a prize fight. It was not a pretty picture.

PHILLIPS: So, a lot of people have this I guess idea that for people like Martha Stewart or Sam Waksal that, you know, they're treated differently in prison that it's sort of -- that the white collar prison inmate is different from others but you're saying that that's not necessarily true.

BONDS: That's very much untrue because the prison population is a whole mix, a cross-section of society. Only about five to six percent of the prison population are white collar criminals in the Club Feds now.

The other 90-some percent are typically drug offenses. So, no, you're not isolated. You're not in a cushy atmosphere and you're in a dangerous atmosphere.

PHILLIPS: And this was the same jail that Leona Helmsley went to also, right?

BONDS: That's right. Leona was at FBC Lexington and then was transferred to FBC Danbury.

PHILLIPS: So, you think Martha is going to get harassed?

BONDS: Oh, without a doubt. Any white collar female going into prison is going to be the target of not only other prisoners but also she's going to be treated with contempt by the guards because, quite frankly, they'll never achieve her level of success working for the Bureau of Prisons.

PHILLIPS: What will her duties entail?

BONDS: She could work in the kitchen. She could work in landscaping. She could work as an orderly cleaning the bathrooms. They're all very menial tasks. There's nothing creative, nothing that requires a brain, just manual labor.

PHILLIPS: All right and I'm not trying to be insensitive here but you mentioned landscaping, all right. Let's look at her background. Let's look where her talents are. Is it possible that she could get in there and start doing something like that and all of a sudden gain the respect of other inmates, somehow develop a bond through what she knows best?

BONDS: Well, what she knows best doesn't apply here because in landscaping you push a lawnmower or use a weed trimmer. There's no creativity involved, no landscaping. That's just another name for grass pushing.

PHILLIPS: There's no beautifying in this prison?

BONDS: There is no beautifying America or the Bureau of Prisons?

PHILLIPS: So, let me ask you then as a female, as someone who didn't have this extensive long criminal record, being side-by-side with others who had, was this a wakeup call for you? Did you at any point sit there or was it afterwards when you got out saying to yourself I will never commit financial fraud again?

BONDS: It was more like being in the middle of a hurricane or a train wreck or some natural disaster to end up there. It was a traumatic experience and to say it isn't, anyone that tells you that you can get by OK, they're not telling you the full truth.

PHILLIPS: Are we talking psychological punishment here more than anything else?

BONDS: Yes. A large part of it is psychological punishment and it's something you never escape. You never get past it.

PHILLIPS: I've got to ask you your advice to Martha Stewart.

BONDS: Make sure that in the next couple of months that you spend all the time you can with your daughter, your mother, your family and learn a little humility and kindness and gentleness and, for Heaven sakes, learn to not speak your mind when you get to prison if you end up there.

PHILLIPS: Very interesting. Did you ever speak your mind, Karen, when you were in there?

BONDS: Yes, I did not that anyone ever paid any attention to me but, yes, I was quite verbal about what I observed that when I saw a Bureau of Prisons employee doing something that did not -- was outside the confines of the rules that they were to be conducting themselves by, I didn't hesitate to point that out to them. So, no, I wasn't popular.

PHILLIPS: Who were some of your fellow inmates, any big names?

BONDS: Nobody who would probably be recognized on a national level that was there. There was a lot of white collars. There were a lot of, you know, drug dealers, a lot of doctors, lawyers, psychologists, bankers and then there was a lot of, you know, very low level people who were maybe just housewives with not even a GED.

PHILLIPS: Well now you've come out. You're an attorney. You're an inmate advocate, why?

BONDS: Because things need to change in the federal prison system. There's very little rehabilitational programming going on and it's my goal to see that Congress in America is educated about the reality of the federal prison system and we're doing that.

A lot of the information on the Web site, www.fppr.us, a wealth of information about the reform activities in the federal prison system there, it needs to be done.

PHILLIPS: And just running your name on the Internet it's interesting to see all the things that you've gotten involved with. Karen, it's an interesting story. You definitely give us a different twist today. We appreciate your time.

BONDS: You're quite welcome.

PHILLIPS: Well, he's gone. Talk about a different twist, he's gone from homeless shelter to the California Boxing Hall of Fame. In just a few minutes we're going to talk with boxing great Ernie Lopez, "Indian Red," in the house talking about his amazing journey. And the journey of 1,000 miles is just starting out for these, you know, about the Iditarod. We're going to take you to that dog sled race straight ahead.

RHONDA SCHAFFLER, CNN FINANCIAL NEWS CORRESPONDENT: I'm Rhonda Schaffler live from the New York Stock Exchange. Business travelers also making more journeys and hotel companies are saying welcome back. I'll have that story when LIVE FROM returns right after this break.

(COMMERCIAL BREAK)

PHILLIPS: Arnold Schwarzenegger flexing his multi-tasking muscle in a big way. The bodybuilder actor turned California (AUDIO GAP) editor of two magazines. Our Miguel Marquez reports.

(BEGIN VIDEOTAPE)

MIGUEL MARQUEZ, CNN CORRESPONDENT (voice-over): The California celebrity governor says he has another job.

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I'm announcing here today that I will be from now on the executive editor of "Muscle and Fitness" and "Flex" magazine, is that a good move or what, huh?

MARQUEZ: A good move, not so much says political science Professor Raph Sonenshein.

RAPHAEL SONENSHEIN, CALIFORNIA STATE FULLERTON: It's not the greatest time in the world to go out and get another job. You got the bond markets watching California that's just decided to borrow $27 billion. If ever there was a time to say let's prove we're serious about the budget and getting down to the budget this is it.

MARQUEZ: Schwarzenegger has written a guest column for ten years in "Muscle and Fitness," was friends with the magazine's previous owner Joe Weider and has appeared on the covers of both magazines a total of 50 times.

"Muscle and Fitness" and "Flex" are owned by the same company that owns the "National Enquirer" and "Star." In the two months leading up to the recall, Schwarzenegger never made the cover of either magazine and was only mentioned twice, once negative, once positive.

SONENSHEIN: They laid off him completely. There were questions raised at the time about what arrangements there may or may not have been between the governor and his allies and those magazines, so it's already an issue and now he's basically on staff.

MARQUEZ (on camera): A spokesman for Governor Schwarzenegger says Schwarzenegger sees no conflict of interest here that this is simply about fitness.

Neither the "National Enquirer" nor "Star" would comment about their editorial practices but a public relations representative for American Media says Schwarzenegger got no special treatment during the recall and his new position will have no impact on the editorial integrity of the company's other publications.

Miguel Marquez, CNN, Los Angeles.

(END VIDEOTAPE)

PHILLIPS: Well, business travel is making a comeback and hotels are ready to take advantage of the increased demand by jacking up the prices. Rhonda Schaffler joins us live from the New York Stock Exchange with that story -- Rhonda.

SCHAFFLER: Hi there, Kyra.

They apparently saw their opening because it has been three dismal years for the hotel business and now we're told demand is rising at an extraordinary pace. That's because the business travelers are back. They're out there traveling.

Thanks to the economic upswing, employers have started relaxing their travel policies allowing employees to schedule more face-to-face meetings and they're letting workers shell out big bucks to stay at luxury hotels but as occupancy rates rise so do prices.

According to accounting firm Price Waterhouse Coopers, hotel demand will increase nearly five percent this year and average daily rates for upscale hotels will rise to about $140 a night and that is up 1.9 percent from last year's average. Most of the boost is coming from U.S. business travelers but international travelers are also returning. They're lured in part by the weak dollar -- Kyra.

PHILLIPS: All right, well it looks like the Pillsbury Dough Boy is in a real jam, what's the story?

SCHAFFLER: A match made in heaven I guess. J.M. Smucker, which is known for jam and jelly is buying International Multi Foods. It is a deal worth more than $800 million. International Multi Foods is the name behind Pillsbury cake mixes and dough and Hungry Man pancake mix.

How are investors reacting to this? Well, Smucker stock down about four percent but International Multi Foods stock is rising 25 percent, not so for the overall market though.

Stocks heading lower now. The Dow Jones Industrial Average off 26 points and the NASDAQ is down more than one percent. That is the latest news from Wall Street.

Coming up, the credit crunch more people are struggling to pay the minimum on their credit cards. I'll have that story when LIVE FROM rolls on right after this break.

(COMMERCIAL BREAK)

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Gathers to Contemplate Possible Corporate Divorce>