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CNN Sunday Morning

Interview With Penelope Patsuris

Aired June 08, 2003 - 07:15   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.


HEIDI COLLINS, CNN ANCHOR: There may be not legal case generating more buzz around the water cooler than Wednesday's indictment of domestic diva Martha Stewart. The media maven who built an empire on the elusive notion of perfection now faces a test of survival, both of the company brand and personal reputation.
For more on that we turn to our guest this morning. Penelope Patsuris, she's in New York this morning, the senior editor of Forbes.com.

Penelope, thanks for being with us today. We appreciate your time.

PENELOPE PATSURIS, SENIOR EDITOR, FORBES.COM: Thanks for having me.

COLLINS: So, how significant were these indictments? We knew she was probably going to have to step down as head of her company. But how significant are the indictments now?

PATSURIS: Well, I think it has really become a bit of a witch hunt. And regardless of the fact that there are plenty of people who may contend that she is in fact a witch, I think it's really unfortunate when there are so many, sort of, far more egregious practices still going on, on Wall Street that have yet to be addressed by the authorities.

But as far as her bouncing back from this, and its significance to the brand, I mean it is certainly hurting the brand. But in the end I think if an ex-con like Michael Milken can bounce back and sort of rehabilitate himself in the public eye, then I'm quite sure that Martha can.

In fact, her business is in a lot of trouble but the scandal is only part of the reason for that. I think what investors should be more focused on, rather than her legal mess, which I don't think is going to amount to much more than some big penalties and maybe some probation. I think what they need to focus on is the fact that her business is in trouble beyond the impact of the scandal.

She's got K-Mart, her primary distributor, which has been in bankruptcy and closing hundreds of stores. And as a result they -

COLLINS: Penelope, let me ask you a quick question.

PATSURIS: Sure. COLLINS: Why do we care about this so much? I mean, it seems like this a brand, if you're someone who is very interested in working on your home, and this is something that you take as a hobby, then yes you will be affected. But as a whole, why do we care so much about the Martha Stewart story?

PATSURIS: Because she is a fabulous perfectionist and it seems like she's had some really imperfect financial and legal advice. And it's a gory picture to watch and so we enjoy it. I have to say that, you know, the prosecutor, Comey, at the press conference, when he released the indictment, he was extremely defensive about how he's not going after Martha because she's a celebrity. He could have prosecuted her on criminal insider trading charges but magnanimously decided not to.

I mean, I think it was a case of him protesting too much. I think that she's being made an example of. In fact, she's even gotten a couple of notes, very interestingly, she's established her Marthatalks.com web site, you know, in order to connect with her consumers.

COLLINS: Yes, she put an ad in the "USA Today" to kind of generate some support for that, right?

PATSURIS: Right. Well, she's trying to develop a dialogue with her fans, which is a really good idea, something she should have done a long time ago. But she's been getting tens of thousands of e-mails already, just in the last couple of days. And she's even gotten a couple of notes from federal prosecutors, who say -- federal agents, I should say, excuse me -- who have said to her, you know, this is really bogus. And it's too bad you're being sucked into all of this.

None of this is to say that she didn't do something wrong. I mean, the fact is that she made a trade on inside information to some degree.

COLLINS: Right.

PATSURIS: And there was someone else on the other end of that trade, that got the short end of the stick. But in the larger picture...

COLLINS: Right, we're certainly going to have to keep it all in perspective of course. And you have mentioned earlier Enron and WorldCom and Tyco and some of those other...

PATSURIS: Yes.

COLLINS: ...companies where millions and billions of dollars, quite frankly.

PATSURIS: Yes.

COLLINS: No indictments there yet, so we'll have to be watching. PATSURIS: But I think as far as her brand goes, the fact of the matter is her consumers have not stopped buying her products throughout this whole thing. And I don't think they're going to. The bottom line is, if her towel matches the color of my bathroom, I'm going to buy it.

COLLINS: Right.

PATSURIS: Where the scandal is hurting her business is on the client side where advertisers are backing away from television and magazine properties. And just in the fact that the scandal, in of itself, is sucking up a lot of money and energy from management which really should be focused on turning the whole thing around, the business that is.

COLLINS: Penelope Patsuris, Forbes.com, we certainly appreciate your insights on this story this morning. Thank you so much for your time.

PATSURIS: Thank you.

COLLINS: Before we leave this story, we actually want to remind you about some numbers for you to be thinking about, $229,000, the amount Martha Stewart made from her December 2001 ImClone stock sale. And $45,673, that is how much less she would have netted had she waited until the day after the FDA announcement, to sell her stock. And $1 billion, the net worth of her empire at its height, when she made the 2000 "Forbes" list of richest Americans. And $10.24, what Martha Stewart Living Omnimedia stock closed at on Friday, from a trading high of $39.75, on October 20, 1999.

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







Aired June 8, 2003 - 07:15   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HEIDI COLLINS, CNN ANCHOR: There may be not legal case generating more buzz around the water cooler than Wednesday's indictment of domestic diva Martha Stewart. The media maven who built an empire on the elusive notion of perfection now faces a test of survival, both of the company brand and personal reputation.
For more on that we turn to our guest this morning. Penelope Patsuris, she's in New York this morning, the senior editor of Forbes.com.

Penelope, thanks for being with us today. We appreciate your time.

PENELOPE PATSURIS, SENIOR EDITOR, FORBES.COM: Thanks for having me.

COLLINS: So, how significant were these indictments? We knew she was probably going to have to step down as head of her company. But how significant are the indictments now?

PATSURIS: Well, I think it has really become a bit of a witch hunt. And regardless of the fact that there are plenty of people who may contend that she is in fact a witch, I think it's really unfortunate when there are so many, sort of, far more egregious practices still going on, on Wall Street that have yet to be addressed by the authorities.

But as far as her bouncing back from this, and its significance to the brand, I mean it is certainly hurting the brand. But in the end I think if an ex-con like Michael Milken can bounce back and sort of rehabilitate himself in the public eye, then I'm quite sure that Martha can.

In fact, her business is in a lot of trouble but the scandal is only part of the reason for that. I think what investors should be more focused on, rather than her legal mess, which I don't think is going to amount to much more than some big penalties and maybe some probation. I think what they need to focus on is the fact that her business is in trouble beyond the impact of the scandal.

She's got K-Mart, her primary distributor, which has been in bankruptcy and closing hundreds of stores. And as a result they -

COLLINS: Penelope, let me ask you a quick question.

PATSURIS: Sure. COLLINS: Why do we care about this so much? I mean, it seems like this a brand, if you're someone who is very interested in working on your home, and this is something that you take as a hobby, then yes you will be affected. But as a whole, why do we care so much about the Martha Stewart story?

PATSURIS: Because she is a fabulous perfectionist and it seems like she's had some really imperfect financial and legal advice. And it's a gory picture to watch and so we enjoy it. I have to say that, you know, the prosecutor, Comey, at the press conference, when he released the indictment, he was extremely defensive about how he's not going after Martha because she's a celebrity. He could have prosecuted her on criminal insider trading charges but magnanimously decided not to.

I mean, I think it was a case of him protesting too much. I think that she's being made an example of. In fact, she's even gotten a couple of notes, very interestingly, she's established her Marthatalks.com web site, you know, in order to connect with her consumers.

COLLINS: Yes, she put an ad in the "USA Today" to kind of generate some support for that, right?

PATSURIS: Right. Well, she's trying to develop a dialogue with her fans, which is a really good idea, something she should have done a long time ago. But she's been getting tens of thousands of e-mails already, just in the last couple of days. And she's even gotten a couple of notes from federal prosecutors, who say -- federal agents, I should say, excuse me -- who have said to her, you know, this is really bogus. And it's too bad you're being sucked into all of this.

None of this is to say that she didn't do something wrong. I mean, the fact is that she made a trade on inside information to some degree.

COLLINS: Right.

PATSURIS: And there was someone else on the other end of that trade, that got the short end of the stick. But in the larger picture...

COLLINS: Right, we're certainly going to have to keep it all in perspective of course. And you have mentioned earlier Enron and WorldCom and Tyco and some of those other...

PATSURIS: Yes.

COLLINS: ...companies where millions and billions of dollars, quite frankly.

PATSURIS: Yes.

COLLINS: No indictments there yet, so we'll have to be watching. PATSURIS: But I think as far as her brand goes, the fact of the matter is her consumers have not stopped buying her products throughout this whole thing. And I don't think they're going to. The bottom line is, if her towel matches the color of my bathroom, I'm going to buy it.

COLLINS: Right.

PATSURIS: Where the scandal is hurting her business is on the client side where advertisers are backing away from television and magazine properties. And just in the fact that the scandal, in of itself, is sucking up a lot of money and energy from management which really should be focused on turning the whole thing around, the business that is.

COLLINS: Penelope Patsuris, Forbes.com, we certainly appreciate your insights on this story this morning. Thank you so much for your time.

PATSURIS: Thank you.

COLLINS: Before we leave this story, we actually want to remind you about some numbers for you to be thinking about, $229,000, the amount Martha Stewart made from her December 2001 ImClone stock sale. And $45,673, that is how much less she would have netted had she waited until the day after the FDA announcement, to sell her stock. And $1 billion, the net worth of her empire at its height, when she made the 2000 "Forbes" list of richest Americans. And $10.24, what Martha Stewart Living Omnimedia stock closed at on Friday, from a trading high of $39.75, on October 20, 1999.

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