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Martha Stewart in Good Spirits as House Arrest Begins; Sister of Michael Jackson's Accuser Takes Stand; Bush Makes Tour to Promote Social Security Reform

Aired March 04, 2005 - 13:00   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, CO-HOST: There's no place like home for Martha Stewart. Back on her 153-acre estate after five months in prison. This hour, what's next for the convicted felon?
TONY HARRIS, CO-HOST: New information in the killings of a federal judge's mother and husband. Investigators make a new move to get more help from the public.

PHILLIPS: You're looking at a man who nearly died 100 times. Dr. Sanjay Gupta has his amazing story.

From the CNN Center in Atlanta, I'm Kyra Phillips.

HARRIS: And I'm Tony Harris, in for Miles O'Brien. CNN's LIVE FROM starts right now.

PHILLIPS: Back to Bedford. It's a very good thing for Martha Stewart, or as she used to be known in the federal prison system, inmate 55170-054.

As you may have heard, Stewart's inmate days are behind her, and five months of house arrest lie ahead.

CNN's Allan Chernoff is at the house in question, Stewart's multimillion-dollar spread in New York's Westchester County -- Allan.

ALLAN CHERNOFF, CNN CORRESPONDENT: Hello, Kyra.

And it was 2:30 in the morning when Martha Stewart arrived back at home in Bedford, New York, about 40 miles north of Manhattan. Martha Stewart, though, was up early this morning, getting reacquainted with her home. In fact, she went out and was petting her horses, walking her dogs, taking a stroll around the estate.

She even stopped to chat with photographers and tell them a little joke.

(BEGIN VIDEO CLIP)

MARTHA STEWART, FOUNDER, MARTHA STEWART LIVING OMNIMEDIA: This is a funny story. We'd asked the guards every day for cappuccino. You know, just as a joke. And they'd come in with their cups of coffee and stuff. And so I get here and I have a spot for a cappuccino machine, and it didn't work. So I don't have any cappuccino. UNIDENTIFIED MALE: She doesn't have any cappuccino. She doesn't have any cappuccino. The cappuccino machine does not work.

STEWART: No. I didn't miss cappuccino at all. It's the idea I missed.

(END VIDEO CLIP)

CHERNOFF: Well, Martha Stewart will be in her home for five months of detention. She'll be permitted out, though, for 48 hours a week. And that, to do some work, you can be sure. She'll be very active at her company, because her company has some big plans.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): Martha Stewart's company is looking to expand where it has never ventured: into the freezer case with frozen foods, into home improvement with cabinets, perhaps windows and doors.

GAEL TOWEY, CREATIVE DIRECTOR, MSLO: I think home improvement is a wonderful direction for us, because we really -- Martha has renovated a lot of houses herself. So I think we'll see a lot of activity in this area.

CHERNOFF: The company that turned crafts and food into an art form is hoping for a big expansion, says chief executive Susan Lyne.

SUSAN LYNE, CEO, MSLO: I believe this is our biggest single asset at this company, is that brand and that brand equity. And we will -- we will build with it.

CHERNOFF: Until now, Martha Stewart has been calling attention to KMart shoppers, where her line of every day product is sold. With KMart buying Sears, there should be new outlets for Stewart. The company's plans, though, are bigger, a homemaker's invasion of China.

But the first brand extension will use the TV archive for how-to videos. Also in the works, delivering content online. Easter basket tips, for example, downloaded to your computer or wireless device.

LYNE: We are doing a lot of -- a lot of thinking, a lot of developing, a lot of exploring of many different options in every area we work in.

CHERNOFF: Martha Stewart will have clout, but she's not returning as an executive of the company. Her most important role, persuade America to once again embrace the marketing of Martha Stewart.

She'll host a new version of "The Apprentice." Though it won't generate revenue for Martha Stewart Living Omnimedia, the company does plan to profit from its new daytime Martha Stewart lifestyle show to premiere this fall.

The biggest challenge: the company desperately needs to revive its trademark magazine, "Martha Stewart Living." Since 2002, when Stewart's legal problems were just beginning, circulation has dropped 20 percent to an average of $1.9 million last year. Advertising has plummeted nearly 70 percent, down to $72 million last year.

Ad executives predict a rebound. The question is how high.

DAVID LAMB, CHIEF STRATEGIC OFFICER, JWT: In the short term, any contact with Martha Stewart has to be examined as an opportunity. The more worrying thing is whether that opportunity disappears after a very short time.

(END VIDEOTAPE)

CHERNOFF: Five months in prison has done much to rehabilitate Martha Stewart's image. And that's giving her company a jump-start. But a full rehab of the company's financials could take quite a bit longer -- Kyra.

PHILLIPS: All right, Alan. I'm counting on you to bring Martha a cappuccino. Thank you so much.

Well, Stewart says her stint in the cooler altered and/or affirmed her life. Whether it alerted (sic) and/or affirmed her image is a subject we're going to take up later this hour with media strategist and friend of LIVE FROM, Robbie Vorhause (ph). And if you missed it last night, catch an encore airing of the Martha Stewart edition of "PEOPLE IN THE NEWS." That's at 8 p.m. Eastern, 5 Pacific right here on CNN.

HARRIS: Well, money talks. And it has been known to motivate people who know about crimes to talk to police. That's the hope in Chicago, where the FBI has just announced a $50,000 reward for fruitful leads in Monday's murders of attorney Michael Lefkow, husband of a federal judge, and Donna Humphrey, the judge's mother.

That comes two days after police released sketches of a pair of so-called persons of interest. And with speculation, informed or otherwise, still fixed firmly on a white supremacist grudge against Judge Lefkow.

(BEGIN VIDEO CLIP)

ROBERT GRANT, FBI SPECIAL AGENT IN CHARGE: Obviously, Matt Hale and his prior conviction for threats to Judge Lefkow is an avenue of investigation that we are going to fully explore, but we have, from day one, determined we are not going to become myopic on this investigation. And everybody agrees with that.

We don't know at this time who did this murder. So we are not pigeonholing ourselves or we are not focusing in an avenue at this point in time. But it is a logical avenue to investigate.

(END VIDEO CLIP)

HARRIS: Hale will be sentenced next month for plotting Judge Lefkow's murder after she ruled against him in a trademark infringement case. He says he had nothing to do with this case. Regardless of who pulled the trigger, Judge Lefkow is vowing to return to the bench.

The end is near in the Robert Blake trial. The defense wraps up its closing argument any time now, after which the prosecution gets one more chance to rebut. Then it's the jury's chance to talk about what they've heard.

Blake's lawyer says it is absolutely absurd to think the long- time actor would kill his wife under a streetlight in his own neighborhood. Prosecutors argue Blake killed Bonny Lee Bakley only when other people refused to do it for him. Both sides agree the couple did not have a fairy tale romance, and Blake considered Bakley a grossly unfit mother.

PHILLIPS: Interesting and frustrating. Michael Jackson's take on prosecution testimony from the sister of the teenage boy whom Jackson befriend then allegedly molested.

Well, that testimony is now in its second day. And cross- examination could make it a long day for the 18-year-old college freshman whom CNN is not identifying because of the nature of the case.

More now on the young woman's direct testimony from CNN's Miguel Marquez. He's in Santa Maria, California.

(BEGIN VIDEOTAPE)

MIGUEL MARQUEZ, CNN CORRESPONDENT (voice-over): Michael Jackson interested and frustrated after a day of testimony by the teenage sister of his accuser. She told a packed courtroom that she saw Jackson and her brothers drinking one time at his Neverland Ranch.

ANNIE SPEMNER, LEGAL ANALYST: Right now, you know, there's evidence in this case that he supplied alcohol to minors, to the complainant. But there has to be a tie.

MARQUEZ: The tie prosecutors want to make, Jackson serving alcohol to the alleged victim and the subsequent molestations of the then 13-year-old cancer patient. Jackson has denied all allegations.

RAYMONE BAIN, JACKSON SPOKESWOMAN: It's very difficult when, you know, you're hearing things about yourself and you want to just stand up and say, "That's not true. Or, oh no, that's wrong."

MARQUEZ: The accuser's sister also testified that Jackson told her family not to watch the controversial Martin Bashir documentary "Living with Michael Jackson." Prosecutors contend that was one of 28 separate acts of conspiracy which they say Jackson orchestrated.

SPEMNER: And what she did was, you know, corroboration, corroboration, corroboration.

MARQUEZ: The 18-year-old college freshman testified while on a private plane from Miami to Los Angeles, she saw Jackson and her brother passing a Diet Coke can, sipping from it and whispering but saw no alcohol. She also said that on more than one occasion, Jackson was alone with her brother in a bedroom behind closed doors. But was she believable?

SPEMNER: Overall, I think credible, very matter of fact, very responsive, very respectful.

(END VIDEOTAPE)

PHILLIPS: Once again, that was Miguel Marquez. He'll join us live next hour outside the courthouse -- Tony.

HARRIS: An old hand gets a new job at EPA. If you've been watching CNN, you saw President Bush nominate Steven Johnson to be the first career EPA scientist to lead that agency.

If confirmed by the Senate, Johnson also will be the first scientist to lead EPA, the people in charge of protecting our air and water. He's been acting administrator since Michael Leavitt left to head health and human services.

Well, Social Security is a human service Mr. Bush has made a top- tier second term priority. Thus, a 60-day, 60-city juggernaut, aimed at turning around popular resistance to his prescription for reform. Today Mr. Bush visits Westfield, New Jersey, and South Bend, Indiana.

And we get the details from CNN's John King at the White House.

Hi, John.

JOHN KING, CNN CORRESPONDENT: Tony, good afternoon to you.

The president between those two stops right now. He has left New Jersey on his way to Indiana. The White House calls this part of a new push, 60 stops in 60 days, as you noted, to promote the president's Social Security reform plan.

But truth be told, the president already had visited nine states before beginning this, quote unquote, new push today. And as he with us traveling before, support for his proposal was actually dropping in the polls.

One of the reasons is a very fierce opposition from the Democrats and some interest groups who have a stake in this, who have been criticizing the president's proposal, especially those so-called private accounts, allowing younger Americans to take Social Security payroll taxes and put them into private investment accounts.

The Democrats have said such a proposal would eviscerate Social Security, a guaranteed program, a social safety net they call it. Today the president changed his rhetoric to address that charge head on.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Social Security has provided a safety net for many retirees. And that's an important safety net. But the safety net, they've got a hole in it. And we need to make sure we save that safety net for future generations of Americans to come.

(END VIDEO CLIP)

KING: Now, the president again today defending his proposal, again diverting a small amount of Social Security payroll taxes into private investment accounts like stocks and bonds. Democrats say that is the wrong way to go. The president is behind in this debate now.

His aides say look back to the past debates over education reform, Medicare reform, tax reform. They say the president was down in the votes in the beginning, ended up with success at the end.

But the president acknowledging in recent days, Tony, he sees he has his work cut out for him. The White House adding more stops top the president's plans in the days and weeks ahead to try to rally public support to get Congress to deal with this.

HARRIS: OK. John King at the White House for us. John, thank you -- Kyra.

PHILLIPS: Straight ahead, for a businesswoman like Martha Stewart, the bottom line is the bottom line. Will her prison release be good for business? We're going to talk about it with the Dolans, unscripted, just ahead.

And stranded dolphins. Rescuers hope to save more than 50 that have washed ashore. We'll have the latest on their efforts straight ahead.

ANNOUNCER: You're watching LIVE FROM on CNN, the most trusted name in news.

(COMMERCIAL BREAK)

HARRIS: Bedford, New York. Today's newly released federal inmate/billionaire/lifestyle guru story brought to you by Martha Stewart Living Omnimedia. Here, fresh out of Alderson, is Martha Stewart enjoying some quiet time on her upstate estate.

The condition of her company and its future the subject of much chatter today. So why not chatter about it a little bit more?

Daria Dolan is here, half of our favorite bickering business partnership. And Daria has a special guest. Daria, explain, please.

DARIA DOLAN, CO-HOST, "DOLANS UNSCRIPTED": Well, you know, Martha Stewart gets 48 hours off the estate.

HARRIS: Yes.

D. DOLAN: Consequently, I've asked her to join me to say hello to you.

HARRIS: Well, this is a coup. This is wonderful. Well, Martha, hello. How are you?

KEN DOLAN, CO-HOST, "DOLANS UNSCRIPTED": Tony, I missed you so. My voice got lower in jail, Tony. But besides that, I really, really missed you. But the real problem I have is baking cookies with an ankle bracelet on. It's really a problem. But I'm telling you, I'm so happy to be out.

D. DOLAN: And on that note, Tony, bring back my husband.

HARRIS: There he is.

D. DOLAN: Or I won't make it through this segment.

K. DOLAN: Tony, it was me. It was me all the time, Tony.

HARRIS: That was wacky. Kyra, just wacky with the Dolans.

PHILLIPS: Don't pull me into this.

HARRIS: I've got to pull you in on this.

PHILLIPS: These two are off the chain.

HARRIS: Wackiness with the Dolans. Ken, good to see you. I knew after 33 years of marriage she hadn't kicked you over. She's going to keep you, you know. Good to see you, Ken.

K. DOLAN: Well...

D. DOLAN: I don't know, Tony. Let me think about this. Ken or Martha? Ken or Martha?

K. DOLAN: Tony, I'll tell you one...

D. DOLAN: It's a toss-up.

K. DOLAN: Tony, I'll tell you one thing. One of the abiding questions people are trying to figure out -- to get serious for a second, Tony ...

HARRIS: Yes, yes.

K. DOLAN: ... is that how is the fact that Martha Stewart is back or will soon be back after a sort of two-day hiatus, getting back to MSO, her company. How will it affect her company positively or negatively? And I will tell you, it is a very, very tricky putt, Tony.

HARRIS: OK. Well, let me -- let me ask the question this way. Is -- does she leave prison, step -- and step into a more lucrative situation than when she landed in prison five months ago?

K. DOLAN: Good question.

D. DOLAN: Tony, I'm going to take that...

HARRIS: OK.

D. DOLAN: ... because it can't get much more lucrative, sitting in prison, going in a multimillionaire and coming out a one billionaire. It was pretty lucrative while she was away.

The trickiness is to maintain the stock price. And if you look at who's buying the stock price right now, it is not the long-term investor. It's a lot of speculators. And it is also believed that one of the reasons the stock has gone higher is because of new SEC rules against short trading in certain situations.

HARRIS: OK, but let me ask you this, Ken.

K. DOLAN: Yes.

HARRIS: Will she trade it all -- would she trade it all to go back pre-ImClone?

K. DOLAN: Well, you know, Tony, that's a super question. I can only just guess if I put myself in her situation.

HARRIS: Sure, sure.

K. DOLAN: I mean, clearly, who wouldn't want to go back, Tony, to pre-jail days? I mean, she's a convicted felon.

HARRIS: Right.

K. DOLAN: So I can't imagine saying, gee, that was great fun, you know?

HARRIS: Yes.

K. DOLAN: I love having that on my record for the rest of my life.

But I think the bigger -- so the answer is I don't think she'd want to go back to that, Tony.

HARRIS: Yes.

K. DOLAN: But I will tell you this. I think things like "The Apprentice," which is going to be this Donald Trump-like thing, I think it's a mistake for her. Because if it's a Trump-like where you're pointing fingers and you're firing, I don't think that's what America, what her fans and what her customers want to see. I think they'd like to see a little quieter, a little more in the back seat rather than "The Apprentice." I think it's a P.R. mistake, Tony.

HARRIS: Well, Daria, let me ask you, then. You know, there is still people who think she got kind of a raw deal. If this were a guy, she wouldn't have gone to prison at all over what -- what she admitted to or what she was convicted of.

D. DOLAN: Yes. And you basically hear that, for the most part, Tony, from women and women only. And I think that it is just blatantly false. And I don't want to have every feminist e-mailing me hate letters now.

But I think that get over it. The woman lied to federal investigators. Anybody, man, woman, child, dog, should go to prison for lying in a federal investigation.

HARRIS: Yes.

K. DOLAN: That's Daria Dolan, in care of CNN, 1 Time Warner Center.

HARRIS: Well, Ken, does she have to...

K. DOLAN: I agree.

HARRIS: You expect that she might strike a different tone now that she's free. She's mentioned in the -- the note on her web site that she wants to talk about this at some point.

K. DOLAN: Yes.

HARRIS: What kind of a tone do you think she'll strike?

K. DOLAN: That's a good point. Maybe something like prisoners' rights, Daria.

D. DOLAN: Well, I think that this is going to be the hot button issue for her going forward, because I think it would endear her to the general population if she became Martha the crusader along with Martha the domestic doyenne.

Because the fact of the matter is she did rail out about conditions for women in prison while she was in Camp Cupcake.

HARRIS: Yes.

D. DOLAN: And it's a natural spillover. And I will be very surprised if we don't see her get meaningfully involved in that, which would be a boon, I think, to her in the public eye.

K. DOLAN: Hey, Tony...

HARRIS: Yes.

K. DOLAN: Here's one corporate dichotomy. Let me just take 30 seconds here.

HARRIS: Sure, sure.

K. DOLAN: A corporate dichotomy is simply this: Susan Lyne, who's the new president there, who is formerly from ABC entertainment, her job is not an easy one. As CEO, her job will be to get -- which it's been for awhile -- to expand the Martha Stewart brand, if you will, by keeping Martha Stewart more in the background because of this situation.

Yet, by the very release, and people at 3:40, even 2:45 this morning or 3:45 this morning...

HARRIS: I know you hate all that. Yes.

K. DOLAN: ... shining lights, it's a tough one, because now Martha is very much in the forefront, really sort of against the corporate strategy of more towards the rear.

HARRIS: Hey...

D. DOLAN: It's really tough, Tony, too, because Susan Lyne has worked there post-Martha. She's never really worked with the woman. I think she may be in for a little bit of a rude awakening. Martha is still the largest shareholder.

HARRIS: OK.

D. DOLAN: And will still hold all the cards.

HARRIS: We'll have to -- we'll have to leave it there.

K. DOLAN: Thank you, Tony.

HARRIS: We're up against it. As always, great to see you here on Fridays on LIVE FROM.

K. DOLAN: Thank you, Tony, so much, Tony.

D. DOLAN: You too, Tony.

HARRIS: And see you tomorrow.

K. DOLAN: Yes. See you tomorrow.

D. DOLAN: You're on.

HARRIS: The Dolans devote much of their hour tomorrow morning to Martha Stewart and her reemergence onto the business landscape. Join the Dolans tomorrow at 10 a.m. Eastern. It's the return of the domestic diva. That's unscripted, the Dolans right here on CNN.

(BEGIN VIDEO CLIP)

PHILLIPS (voice-over): Next on LIVE FROM, Martha Stewart. Will her empire survive even if she's a convicted felon? A P.R. pro talks about the pitfalls she needs to avoid.

Later on LIVE FROM, is intelligence reform keeping you safer? The CIA director says he's overwhelmed, confused about his relationship with the new director of intelligence. A former CIA insider joins us live.

Later on LIVE FROM...

UNIDENTIFIED FEMALE: We're telling people they're victims and ho's and sluts and not be worthy of respect.

PHILLIPS: A campus campaign to take back the music and clean up the images in hip-hop videos.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

PHILLIPS: In Iraq, a positive development to report today. Giuliana Sgrena a free woman. The Italian journalist was kidnapped February 4 in Baghdad. Her videotaped plea for help aired around the world some weeks after. Well, we learned of her release in the last 30 minutes.

Reality check: it's been another day of deadly insurgent violence in Iraq. South of Baghdad this morning, attackers shot and killed a town's police chief. The Polish military is deployed there. They're investigating.

In Hillah, site of the insurgency's word -- worst attack to date, crowds massed today, calling for revenge. Many believe in Hillah believe that Sunni Ba'athists carried out Monday's car bombing that killed nearly 130 people. The protestors want the new Iraqi government to formally ban Islamic extremist groups.

In neighboring Syria, there's buzz today of developments that could change the face of the Middle East as we know it. President Bashar al-Assad is set to make a speech tomorrow. Middle East watchers expect him to set a timeline for the partial withdrawal of his troops from Lebanon.

Pressure on Assad to do so has grown drastically, both from the West and the Arab world, since the former Lebanese prime minister's killing last month.

And word today also that Saudi and Egyptian leaders are joining President Bush's call for the removal of Syrian forces before Lebanon holds parliamentary elections in May.

HARRIS: Democracy and equality. Nothing is exactly taking the Arab world by storm. But who, a few years ago, would have believed you if you told them that a popular uprising brought down Lebanon's government or that the Iraqi people picked a national assembly?

Times, they are a-changing in the once dictator-dominated east. Our Cairo bureau chief, Ben Wedeman, reports that one man is getting at least partial credit.

(BEGIN VIDEOTAPE)

BEN WEDEMAN, CNN CORRESPONDENT (voice-over): In Lebanon, people power brings down the Syrian-controlled government. In Iraq, voters defy death threats to cast their ballots. In Gaza and the West Bank, victory for a moderate in an election under occupation. In Egypt, the only leader most Egyptians have ever known promises reform. In Saudi Arabia, men, but not women, have their first ever chance to vote.

It doesn't yet add up to a democratic revolution in a region long dominated by dictators, but it's a start. So what's behind it? Was it this man?

BUSH: America will stand with the allies of freedom to support democratic movements in the Middle East and beyond, with the ultimate goal of ending tyranny in our world.

WEDEMAN: Egypt's long-suffering opposition bristles at the notion that George W. Bush, the man so many here love to hate, and his repeated calls for democracy in the Arab world, may have had a role.

RIFAAT SAID, EGYPTIAN OPPOSITION LEADER: Twenty-five years I am demanding this demand. And here comes Mr. Bush and put a leg over a leg and said, "I did it." I didn't accept it.

WEDEMAN: But the opposition here and elsewhere in the Arab world was never really able to budge powerful entrenched regimes, backed up by armies and secret police.

Arab observers credit President Bush, but insist he didn't spark the latest changes.

ABDEL MUNEIM SAID, ANALYST: But in the overall, we can count it as a factor for sure. But it was not only the United States. I think also the European approach to it, it was much more cooler, calmer.

WEDEMAN: Egyptian playwright Ali Salem says Arab eyes are now wide open.

ALI SALEM, EGYPTIAN PLAYWRIGHT: People are watching the television. They're watching the others, and they feel jealousy about that. They feel that they have the right to be like the others.

WEDEMAN: Ruled and rulers alike realize the times are changing.

(on camera) An aging Arab leader recently said, "We need to trim our mustaches before someone else shaves them clean off." One of the barbers may turn out to be George W. Bush.

Ben Wedeman, CNN, Cairo.

(END VIDEOTAPE)

PHILLIPS: In the news this hour, how dangerous is this man? Federal prosecutors say very. The trial of Sheik Mohammed Ali Hassan al-Moayad is closing arguments today in New York. The Yemeni cleric charged with helping al Qaeda and Hamas with material and money. The defense claims his client is being stereotyped as an Arab man in a climate of fear.

Cautious warning: if you take the antidepressant Paxil or the diabetes drug Avandamet, well, the FDA is seizing batches of the tablets from a drug plant in Puerto Rico and a distribution center in Tennessee. The government says that there are concerns over quality at the GlaxoSmithKline plant. The FDA says that current patients shouldn't worry about drugs they already have but to contract -- contact their doctors. No response yet from GlaxoSmithKline.

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Aired March 4, 2005 - 13:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CO-HOST: There's no place like home for Martha Stewart. Back on her 153-acre estate after five months in prison. This hour, what's next for the convicted felon?
TONY HARRIS, CO-HOST: New information in the killings of a federal judge's mother and husband. Investigators make a new move to get more help from the public.

PHILLIPS: You're looking at a man who nearly died 100 times. Dr. Sanjay Gupta has his amazing story.

From the CNN Center in Atlanta, I'm Kyra Phillips.

HARRIS: And I'm Tony Harris, in for Miles O'Brien. CNN's LIVE FROM starts right now.

PHILLIPS: Back to Bedford. It's a very good thing for Martha Stewart, or as she used to be known in the federal prison system, inmate 55170-054.

As you may have heard, Stewart's inmate days are behind her, and five months of house arrest lie ahead.

CNN's Allan Chernoff is at the house in question, Stewart's multimillion-dollar spread in New York's Westchester County -- Allan.

ALLAN CHERNOFF, CNN CORRESPONDENT: Hello, Kyra.

And it was 2:30 in the morning when Martha Stewart arrived back at home in Bedford, New York, about 40 miles north of Manhattan. Martha Stewart, though, was up early this morning, getting reacquainted with her home. In fact, she went out and was petting her horses, walking her dogs, taking a stroll around the estate.

She even stopped to chat with photographers and tell them a little joke.

(BEGIN VIDEO CLIP)

MARTHA STEWART, FOUNDER, MARTHA STEWART LIVING OMNIMEDIA: This is a funny story. We'd asked the guards every day for cappuccino. You know, just as a joke. And they'd come in with their cups of coffee and stuff. And so I get here and I have a spot for a cappuccino machine, and it didn't work. So I don't have any cappuccino. UNIDENTIFIED MALE: She doesn't have any cappuccino. She doesn't have any cappuccino. The cappuccino machine does not work.

STEWART: No. I didn't miss cappuccino at all. It's the idea I missed.

(END VIDEO CLIP)

CHERNOFF: Well, Martha Stewart will be in her home for five months of detention. She'll be permitted out, though, for 48 hours a week. And that, to do some work, you can be sure. She'll be very active at her company, because her company has some big plans.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): Martha Stewart's company is looking to expand where it has never ventured: into the freezer case with frozen foods, into home improvement with cabinets, perhaps windows and doors.

GAEL TOWEY, CREATIVE DIRECTOR, MSLO: I think home improvement is a wonderful direction for us, because we really -- Martha has renovated a lot of houses herself. So I think we'll see a lot of activity in this area.

CHERNOFF: The company that turned crafts and food into an art form is hoping for a big expansion, says chief executive Susan Lyne.

SUSAN LYNE, CEO, MSLO: I believe this is our biggest single asset at this company, is that brand and that brand equity. And we will -- we will build with it.

CHERNOFF: Until now, Martha Stewart has been calling attention to KMart shoppers, where her line of every day product is sold. With KMart buying Sears, there should be new outlets for Stewart. The company's plans, though, are bigger, a homemaker's invasion of China.

But the first brand extension will use the TV archive for how-to videos. Also in the works, delivering content online. Easter basket tips, for example, downloaded to your computer or wireless device.

LYNE: We are doing a lot of -- a lot of thinking, a lot of developing, a lot of exploring of many different options in every area we work in.

CHERNOFF: Martha Stewart will have clout, but she's not returning as an executive of the company. Her most important role, persuade America to once again embrace the marketing of Martha Stewart.

She'll host a new version of "The Apprentice." Though it won't generate revenue for Martha Stewart Living Omnimedia, the company does plan to profit from its new daytime Martha Stewart lifestyle show to premiere this fall.

The biggest challenge: the company desperately needs to revive its trademark magazine, "Martha Stewart Living." Since 2002, when Stewart's legal problems were just beginning, circulation has dropped 20 percent to an average of $1.9 million last year. Advertising has plummeted nearly 70 percent, down to $72 million last year.

Ad executives predict a rebound. The question is how high.

DAVID LAMB, CHIEF STRATEGIC OFFICER, JWT: In the short term, any contact with Martha Stewart has to be examined as an opportunity. The more worrying thing is whether that opportunity disappears after a very short time.

(END VIDEOTAPE)

CHERNOFF: Five months in prison has done much to rehabilitate Martha Stewart's image. And that's giving her company a jump-start. But a full rehab of the company's financials could take quite a bit longer -- Kyra.

PHILLIPS: All right, Alan. I'm counting on you to bring Martha a cappuccino. Thank you so much.

Well, Stewart says her stint in the cooler altered and/or affirmed her life. Whether it alerted (sic) and/or affirmed her image is a subject we're going to take up later this hour with media strategist and friend of LIVE FROM, Robbie Vorhause (ph). And if you missed it last night, catch an encore airing of the Martha Stewart edition of "PEOPLE IN THE NEWS." That's at 8 p.m. Eastern, 5 Pacific right here on CNN.

HARRIS: Well, money talks. And it has been known to motivate people who know about crimes to talk to police. That's the hope in Chicago, where the FBI has just announced a $50,000 reward for fruitful leads in Monday's murders of attorney Michael Lefkow, husband of a federal judge, and Donna Humphrey, the judge's mother.

That comes two days after police released sketches of a pair of so-called persons of interest. And with speculation, informed or otherwise, still fixed firmly on a white supremacist grudge against Judge Lefkow.

(BEGIN VIDEO CLIP)

ROBERT GRANT, FBI SPECIAL AGENT IN CHARGE: Obviously, Matt Hale and his prior conviction for threats to Judge Lefkow is an avenue of investigation that we are going to fully explore, but we have, from day one, determined we are not going to become myopic on this investigation. And everybody agrees with that.

We don't know at this time who did this murder. So we are not pigeonholing ourselves or we are not focusing in an avenue at this point in time. But it is a logical avenue to investigate.

(END VIDEO CLIP)

HARRIS: Hale will be sentenced next month for plotting Judge Lefkow's murder after she ruled against him in a trademark infringement case. He says he had nothing to do with this case. Regardless of who pulled the trigger, Judge Lefkow is vowing to return to the bench.

The end is near in the Robert Blake trial. The defense wraps up its closing argument any time now, after which the prosecution gets one more chance to rebut. Then it's the jury's chance to talk about what they've heard.

Blake's lawyer says it is absolutely absurd to think the long- time actor would kill his wife under a streetlight in his own neighborhood. Prosecutors argue Blake killed Bonny Lee Bakley only when other people refused to do it for him. Both sides agree the couple did not have a fairy tale romance, and Blake considered Bakley a grossly unfit mother.

PHILLIPS: Interesting and frustrating. Michael Jackson's take on prosecution testimony from the sister of the teenage boy whom Jackson befriend then allegedly molested.

Well, that testimony is now in its second day. And cross- examination could make it a long day for the 18-year-old college freshman whom CNN is not identifying because of the nature of the case.

More now on the young woman's direct testimony from CNN's Miguel Marquez. He's in Santa Maria, California.

(BEGIN VIDEOTAPE)

MIGUEL MARQUEZ, CNN CORRESPONDENT (voice-over): Michael Jackson interested and frustrated after a day of testimony by the teenage sister of his accuser. She told a packed courtroom that she saw Jackson and her brothers drinking one time at his Neverland Ranch.

ANNIE SPEMNER, LEGAL ANALYST: Right now, you know, there's evidence in this case that he supplied alcohol to minors, to the complainant. But there has to be a tie.

MARQUEZ: The tie prosecutors want to make, Jackson serving alcohol to the alleged victim and the subsequent molestations of the then 13-year-old cancer patient. Jackson has denied all allegations.

RAYMONE BAIN, JACKSON SPOKESWOMAN: It's very difficult when, you know, you're hearing things about yourself and you want to just stand up and say, "That's not true. Or, oh no, that's wrong."

MARQUEZ: The accuser's sister also testified that Jackson told her family not to watch the controversial Martin Bashir documentary "Living with Michael Jackson." Prosecutors contend that was one of 28 separate acts of conspiracy which they say Jackson orchestrated.

SPEMNER: And what she did was, you know, corroboration, corroboration, corroboration.

MARQUEZ: The 18-year-old college freshman testified while on a private plane from Miami to Los Angeles, she saw Jackson and her brother passing a Diet Coke can, sipping from it and whispering but saw no alcohol. She also said that on more than one occasion, Jackson was alone with her brother in a bedroom behind closed doors. But was she believable?

SPEMNER: Overall, I think credible, very matter of fact, very responsive, very respectful.

(END VIDEOTAPE)

PHILLIPS: Once again, that was Miguel Marquez. He'll join us live next hour outside the courthouse -- Tony.

HARRIS: An old hand gets a new job at EPA. If you've been watching CNN, you saw President Bush nominate Steven Johnson to be the first career EPA scientist to lead that agency.

If confirmed by the Senate, Johnson also will be the first scientist to lead EPA, the people in charge of protecting our air and water. He's been acting administrator since Michael Leavitt left to head health and human services.

Well, Social Security is a human service Mr. Bush has made a top- tier second term priority. Thus, a 60-day, 60-city juggernaut, aimed at turning around popular resistance to his prescription for reform. Today Mr. Bush visits Westfield, New Jersey, and South Bend, Indiana.

And we get the details from CNN's John King at the White House.

Hi, John.

JOHN KING, CNN CORRESPONDENT: Tony, good afternoon to you.

The president between those two stops right now. He has left New Jersey on his way to Indiana. The White House calls this part of a new push, 60 stops in 60 days, as you noted, to promote the president's Social Security reform plan.

But truth be told, the president already had visited nine states before beginning this, quote unquote, new push today. And as he with us traveling before, support for his proposal was actually dropping in the polls.

One of the reasons is a very fierce opposition from the Democrats and some interest groups who have a stake in this, who have been criticizing the president's proposal, especially those so-called private accounts, allowing younger Americans to take Social Security payroll taxes and put them into private investment accounts.

The Democrats have said such a proposal would eviscerate Social Security, a guaranteed program, a social safety net they call it. Today the president changed his rhetoric to address that charge head on.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Social Security has provided a safety net for many retirees. And that's an important safety net. But the safety net, they've got a hole in it. And we need to make sure we save that safety net for future generations of Americans to come.

(END VIDEO CLIP)

KING: Now, the president again today defending his proposal, again diverting a small amount of Social Security payroll taxes into private investment accounts like stocks and bonds. Democrats say that is the wrong way to go. The president is behind in this debate now.

His aides say look back to the past debates over education reform, Medicare reform, tax reform. They say the president was down in the votes in the beginning, ended up with success at the end.

But the president acknowledging in recent days, Tony, he sees he has his work cut out for him. The White House adding more stops top the president's plans in the days and weeks ahead to try to rally public support to get Congress to deal with this.

HARRIS: OK. John King at the White House for us. John, thank you -- Kyra.

PHILLIPS: Straight ahead, for a businesswoman like Martha Stewart, the bottom line is the bottom line. Will her prison release be good for business? We're going to talk about it with the Dolans, unscripted, just ahead.

And stranded dolphins. Rescuers hope to save more than 50 that have washed ashore. We'll have the latest on their efforts straight ahead.

ANNOUNCER: You're watching LIVE FROM on CNN, the most trusted name in news.

(COMMERCIAL BREAK)

HARRIS: Bedford, New York. Today's newly released federal inmate/billionaire/lifestyle guru story brought to you by Martha Stewart Living Omnimedia. Here, fresh out of Alderson, is Martha Stewart enjoying some quiet time on her upstate estate.

The condition of her company and its future the subject of much chatter today. So why not chatter about it a little bit more?

Daria Dolan is here, half of our favorite bickering business partnership. And Daria has a special guest. Daria, explain, please.

DARIA DOLAN, CO-HOST, "DOLANS UNSCRIPTED": Well, you know, Martha Stewart gets 48 hours off the estate.

HARRIS: Yes.

D. DOLAN: Consequently, I've asked her to join me to say hello to you.

HARRIS: Well, this is a coup. This is wonderful. Well, Martha, hello. How are you?

KEN DOLAN, CO-HOST, "DOLANS UNSCRIPTED": Tony, I missed you so. My voice got lower in jail, Tony. But besides that, I really, really missed you. But the real problem I have is baking cookies with an ankle bracelet on. It's really a problem. But I'm telling you, I'm so happy to be out.

D. DOLAN: And on that note, Tony, bring back my husband.

HARRIS: There he is.

D. DOLAN: Or I won't make it through this segment.

K. DOLAN: Tony, it was me. It was me all the time, Tony.

HARRIS: That was wacky. Kyra, just wacky with the Dolans.

PHILLIPS: Don't pull me into this.

HARRIS: I've got to pull you in on this.

PHILLIPS: These two are off the chain.

HARRIS: Wackiness with the Dolans. Ken, good to see you. I knew after 33 years of marriage she hadn't kicked you over. She's going to keep you, you know. Good to see you, Ken.

K. DOLAN: Well...

D. DOLAN: I don't know, Tony. Let me think about this. Ken or Martha? Ken or Martha?

K. DOLAN: Tony, I'll tell you one...

D. DOLAN: It's a toss-up.

K. DOLAN: Tony, I'll tell you one thing. One of the abiding questions people are trying to figure out -- to get serious for a second, Tony ...

HARRIS: Yes, yes.

K. DOLAN: ... is that how is the fact that Martha Stewart is back or will soon be back after a sort of two-day hiatus, getting back to MSO, her company. How will it affect her company positively or negatively? And I will tell you, it is a very, very tricky putt, Tony.

HARRIS: OK. Well, let me -- let me ask the question this way. Is -- does she leave prison, step -- and step into a more lucrative situation than when she landed in prison five months ago?

K. DOLAN: Good question.

D. DOLAN: Tony, I'm going to take that...

HARRIS: OK.

D. DOLAN: ... because it can't get much more lucrative, sitting in prison, going in a multimillionaire and coming out a one billionaire. It was pretty lucrative while she was away.

The trickiness is to maintain the stock price. And if you look at who's buying the stock price right now, it is not the long-term investor. It's a lot of speculators. And it is also believed that one of the reasons the stock has gone higher is because of new SEC rules against short trading in certain situations.

HARRIS: OK, but let me ask you this, Ken.

K. DOLAN: Yes.

HARRIS: Will she trade it all -- would she trade it all to go back pre-ImClone?

K. DOLAN: Well, you know, Tony, that's a super question. I can only just guess if I put myself in her situation.

HARRIS: Sure, sure.

K. DOLAN: I mean, clearly, who wouldn't want to go back, Tony, to pre-jail days? I mean, she's a convicted felon.

HARRIS: Right.

K. DOLAN: So I can't imagine saying, gee, that was great fun, you know?

HARRIS: Yes.

K. DOLAN: I love having that on my record for the rest of my life.

But I think the bigger -- so the answer is I don't think she'd want to go back to that, Tony.

HARRIS: Yes.

K. DOLAN: But I will tell you this. I think things like "The Apprentice," which is going to be this Donald Trump-like thing, I think it's a mistake for her. Because if it's a Trump-like where you're pointing fingers and you're firing, I don't think that's what America, what her fans and what her customers want to see. I think they'd like to see a little quieter, a little more in the back seat rather than "The Apprentice." I think it's a P.R. mistake, Tony.

HARRIS: Well, Daria, let me ask you, then. You know, there is still people who think she got kind of a raw deal. If this were a guy, she wouldn't have gone to prison at all over what -- what she admitted to or what she was convicted of.

D. DOLAN: Yes. And you basically hear that, for the most part, Tony, from women and women only. And I think that it is just blatantly false. And I don't want to have every feminist e-mailing me hate letters now.

But I think that get over it. The woman lied to federal investigators. Anybody, man, woman, child, dog, should go to prison for lying in a federal investigation.

HARRIS: Yes.

K. DOLAN: That's Daria Dolan, in care of CNN, 1 Time Warner Center.

HARRIS: Well, Ken, does she have to...

K. DOLAN: I agree.

HARRIS: You expect that she might strike a different tone now that she's free. She's mentioned in the -- the note on her web site that she wants to talk about this at some point.

K. DOLAN: Yes.

HARRIS: What kind of a tone do you think she'll strike?

K. DOLAN: That's a good point. Maybe something like prisoners' rights, Daria.

D. DOLAN: Well, I think that this is going to be the hot button issue for her going forward, because I think it would endear her to the general population if she became Martha the crusader along with Martha the domestic doyenne.

Because the fact of the matter is she did rail out about conditions for women in prison while she was in Camp Cupcake.

HARRIS: Yes.

D. DOLAN: And it's a natural spillover. And I will be very surprised if we don't see her get meaningfully involved in that, which would be a boon, I think, to her in the public eye.

K. DOLAN: Hey, Tony...

HARRIS: Yes.

K. DOLAN: Here's one corporate dichotomy. Let me just take 30 seconds here.

HARRIS: Sure, sure.

K. DOLAN: A corporate dichotomy is simply this: Susan Lyne, who's the new president there, who is formerly from ABC entertainment, her job is not an easy one. As CEO, her job will be to get -- which it's been for awhile -- to expand the Martha Stewart brand, if you will, by keeping Martha Stewart more in the background because of this situation.

Yet, by the very release, and people at 3:40, even 2:45 this morning or 3:45 this morning...

HARRIS: I know you hate all that. Yes.

K. DOLAN: ... shining lights, it's a tough one, because now Martha is very much in the forefront, really sort of against the corporate strategy of more towards the rear.

HARRIS: Hey...

D. DOLAN: It's really tough, Tony, too, because Susan Lyne has worked there post-Martha. She's never really worked with the woman. I think she may be in for a little bit of a rude awakening. Martha is still the largest shareholder.

HARRIS: OK.

D. DOLAN: And will still hold all the cards.

HARRIS: We'll have to -- we'll have to leave it there.

K. DOLAN: Thank you, Tony.

HARRIS: We're up against it. As always, great to see you here on Fridays on LIVE FROM.

K. DOLAN: Thank you, Tony, so much, Tony.

D. DOLAN: You too, Tony.

HARRIS: And see you tomorrow.

K. DOLAN: Yes. See you tomorrow.

D. DOLAN: You're on.

HARRIS: The Dolans devote much of their hour tomorrow morning to Martha Stewart and her reemergence onto the business landscape. Join the Dolans tomorrow at 10 a.m. Eastern. It's the return of the domestic diva. That's unscripted, the Dolans right here on CNN.

(BEGIN VIDEO CLIP)

PHILLIPS (voice-over): Next on LIVE FROM, Martha Stewart. Will her empire survive even if she's a convicted felon? A P.R. pro talks about the pitfalls she needs to avoid.

Later on LIVE FROM, is intelligence reform keeping you safer? The CIA director says he's overwhelmed, confused about his relationship with the new director of intelligence. A former CIA insider joins us live.

Later on LIVE FROM...

UNIDENTIFIED FEMALE: We're telling people they're victims and ho's and sluts and not be worthy of respect.

PHILLIPS: A campus campaign to take back the music and clean up the images in hip-hop videos.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

PHILLIPS: In Iraq, a positive development to report today. Giuliana Sgrena a free woman. The Italian journalist was kidnapped February 4 in Baghdad. Her videotaped plea for help aired around the world some weeks after. Well, we learned of her release in the last 30 minutes.

Reality check: it's been another day of deadly insurgent violence in Iraq. South of Baghdad this morning, attackers shot and killed a town's police chief. The Polish military is deployed there. They're investigating.

In Hillah, site of the insurgency's word -- worst attack to date, crowds massed today, calling for revenge. Many believe in Hillah believe that Sunni Ba'athists carried out Monday's car bombing that killed nearly 130 people. The protestors want the new Iraqi government to formally ban Islamic extremist groups.

In neighboring Syria, there's buzz today of developments that could change the face of the Middle East as we know it. President Bashar al-Assad is set to make a speech tomorrow. Middle East watchers expect him to set a timeline for the partial withdrawal of his troops from Lebanon.

Pressure on Assad to do so has grown drastically, both from the West and the Arab world, since the former Lebanese prime minister's killing last month.

And word today also that Saudi and Egyptian leaders are joining President Bush's call for the removal of Syrian forces before Lebanon holds parliamentary elections in May.

HARRIS: Democracy and equality. Nothing is exactly taking the Arab world by storm. But who, a few years ago, would have believed you if you told them that a popular uprising brought down Lebanon's government or that the Iraqi people picked a national assembly?

Times, they are a-changing in the once dictator-dominated east. Our Cairo bureau chief, Ben Wedeman, reports that one man is getting at least partial credit.

(BEGIN VIDEOTAPE)

BEN WEDEMAN, CNN CORRESPONDENT (voice-over): In Lebanon, people power brings down the Syrian-controlled government. In Iraq, voters defy death threats to cast their ballots. In Gaza and the West Bank, victory for a moderate in an election under occupation. In Egypt, the only leader most Egyptians have ever known promises reform. In Saudi Arabia, men, but not women, have their first ever chance to vote.

It doesn't yet add up to a democratic revolution in a region long dominated by dictators, but it's a start. So what's behind it? Was it this man?

BUSH: America will stand with the allies of freedom to support democratic movements in the Middle East and beyond, with the ultimate goal of ending tyranny in our world.

WEDEMAN: Egypt's long-suffering opposition bristles at the notion that George W. Bush, the man so many here love to hate, and his repeated calls for democracy in the Arab world, may have had a role.

RIFAAT SAID, EGYPTIAN OPPOSITION LEADER: Twenty-five years I am demanding this demand. And here comes Mr. Bush and put a leg over a leg and said, "I did it." I didn't accept it.

WEDEMAN: But the opposition here and elsewhere in the Arab world was never really able to budge powerful entrenched regimes, backed up by armies and secret police.

Arab observers credit President Bush, but insist he didn't spark the latest changes.

ABDEL MUNEIM SAID, ANALYST: But in the overall, we can count it as a factor for sure. But it was not only the United States. I think also the European approach to it, it was much more cooler, calmer.

WEDEMAN: Egyptian playwright Ali Salem says Arab eyes are now wide open.

ALI SALEM, EGYPTIAN PLAYWRIGHT: People are watching the television. They're watching the others, and they feel jealousy about that. They feel that they have the right to be like the others.

WEDEMAN: Ruled and rulers alike realize the times are changing.

(on camera) An aging Arab leader recently said, "We need to trim our mustaches before someone else shaves them clean off." One of the barbers may turn out to be George W. Bush.

Ben Wedeman, CNN, Cairo.

(END VIDEOTAPE)

PHILLIPS: In the news this hour, how dangerous is this man? Federal prosecutors say very. The trial of Sheik Mohammed Ali Hassan al-Moayad is closing arguments today in New York. The Yemeni cleric charged with helping al Qaeda and Hamas with material and money. The defense claims his client is being stereotyped as an Arab man in a climate of fear.

Cautious warning: if you take the antidepressant Paxil or the diabetes drug Avandamet, well, the FDA is seizing batches of the tablets from a drug plant in Puerto Rico and a distribution center in Tennessee. The government says that there are concerns over quality at the GlaxoSmithKline plant. The FDA says that current patients shouldn't worry about drugs they already have but to contract -- contact their doctors. No response yet from GlaxoSmithKline.

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