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This chapter is from the book

Never Let Her Go

And the feds would never let her go.

Accused of insider trading at the start of the federal probe against her, she was eventually charged with a completely different crime and no insider trading charges were filed. For months the federal authorities looked into Stewart’s stock sale, interviewing her twice, talking with her stockbroker and the stockbroker’s assistant, hoping to build an insider trading case against her.

But, after 18 months, the authorities were unable to prove that what she did constituted insider trading; but they did catch Stewart committing other alleged crimes: lying to authorities; obstruction of justice, conspiracy, and securities fraud. And so they indicted her on these charges, less venal than insider trading, but still criminal.

Even after she was indicted, no one seriously believed that Martha Stewart would wind up in a courtroom. It all seemed so preposterous, her getting into legal trouble over a stock tip, and over avoiding the loss of such a small ($45,000) amount of money.

But she wound up in a courtroom—and then prison—because she refused to take the feds seriously. In pressing their case against her, they were clearly dissenting from her version of reality—the one in which Martha Stewart could do no wrong.

But she refused to brook any dissenters, and so she came armed for battle against the feds.

Rather than take the feds seriously, she trivialized their efforts. She sought to marginalize what they were doing. She felt that she had done nothing wrong and, at least with respect to her taking that controversial stock tip, she was right about that.

Having done nothing wrong from her perspective, she saw no reason to bend her version of reality.

The problem for her was that she had done something wrong; at least she certainly gave the impression that she had. She had lied to the feds and that was a federal crime.

Thinking that she had done nothing wrong, she fell back on her defense mechanisms; trivialize, marginalize, proclaim your innocence; make it clear that you have better things to do with your time. By taking that tack, she had seriously disconnected herself from reality. She could never defeat the feds with such strategies. But she tried.

The more she became disconnected from reality, the more stiff-necked and nasty she came off. She relied on such traits to overwhelm her rivals. But the feds would not budge. They gave her opportunities to pull the plug on her legal battle. She could have settled her case. She could have avoided a trial and a guilty conviction and jail.

But she insisted on believing that her version of reality would ultimately triumph—and she was wrong. She won no credit for carrying on with her legal struggle. To most people, including the feds, she simply seemed stubborn. And indeed she was.

She became a victim of her stubbornness and made one bad legal decision after another—and all the while the world was watching.

Because she chose to fight rather than to resolve her predicament right away, and because she was the most famous woman in America, she gave the media a dramatic story that at times seemed more important than cataclysmic political events or natural catastrophes.

Though the Martha Stewart legal case came at a time of seemingly constant corporate scandal, she received more media coverage during her courtroom drama than any other celebrity since the 1995 O.J. Simpson trial. Some called Martha Stewart’s the first big corporate scandal case of that era, and they drew comparisons between her case and those of Enron, Tyco, Adelphia, and WorldCom. But it was ludicrous to mention her legal case in the same breath with Ken Lay, Bernie Ebbers, and Dennis Koslovsky, corporate leaders who had done far more mischief, and caused far more harm to shareholders and employees.

The feds benefited from the massive media coverage; Martha Stewart did not. She had to preserve her reputation and putting a cloak of secrecy over her case seemed the best way to do that; so she hardly spoke about her case in public; she was thrilled that for the first six months of the probe, the public was kept in the dark.

But the feds wanted to look like white knights in shining armor, dealing a blow to corporate mischief, protecting the little guy against the big, bad scandalmongers. For that they needed all the publicity they could muster. And so they sought to surround the Stewart case with compelling drama: They called press conferences for routine announcements; they turned the trial into a morality play, the good guys (the Government) vs. the bad guys (Martha Stewart and her stockbroker, Peter Bacanovic); and they linked Stewart’s alleged crimes with the corporate scandals of the day (Enron, Tyco, and the like).

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