Storytelling In The News: #83

Martha Stewart gets a legal lesson in storytelling

March 9, 2004

When we are confronted with the possibility of having been involved in wrongdoing, we have three storytelling options: truth, silence or lies:

* truth: we can tell the full story and be as forthcoming as possible - the truth, the whole truth, and nothing but the truth; or

* silence: we can decline to tell any story, and invoke our constitutional right to remain silent and not further incriminate ourselves; or

* lies: we can invent a new story - an alibi that purports to absolve us from responsibility for the supposed wrongdoing.

The three options have different practical and moral consequences:

* the first storytelling option - truth - is the morally responsible course of action to follow. One lets the chips fall where they may. One accepts the consequences of one's actions, on the assumption that the prosecution will also act responsibly and morally.

* the second storytelling option - silence - may be more prudent, particularly in situations where the prosecution is not responsible or pursuing a moral course of action.

* the third storytelling option - lies - is generally neither prudent nor moral. It may require diabolical cunning to weave of web of lies that does not collapse under scrutiny of phone calls, documents, emails and conversations that occurred in the context of a different story. It may require the loyalty, and even perjury, of friends and colleagues in order to support the web of lies one has constructed. It may depend on the absence of enemies who emerge from the woodwork to air their grievances at the least opportune moment. If the alibi fails, it may get us into deeper trouble than we were in to start with.

The case of Martha Stewart

Martha Stewart, who was convicted on four counts of obstruction of justice and making false statements on Friday March 5, began by purporting to adopt storytelling option one - she talked to FBI agents and investigators from the Securities and Exchange Commission (SEC) and told her story.

At her trial, she slid into storytelling option two - silence - by declining to take the witness stand in her own defense.

The jury however concluded that she was pursuing storytelling option three - lies - and found her guilty on all counts. She now faces between ten and sixteen months in prison. The lesson in storytelling has also been quite expensive: she has already lost several hundred million dollars in market capitalization of her company.

Her defense stumbled on all the usual pitfalls of the alibi option:

* lack of diabolical cunning: her claim that she had a standing order to sell her stock in ImClone when it fell below $60 wasn't consistent with other conversations and testimony, such as her own actions in deleting and then reinstating a note of a phone message.

* friends: one juror said that the most damning testimony came from Mariana Pasternak, a longtime friend of . Stewart who was traveling with her to Mexico on the day Ms. Stewart sold her ImClone shares. Testifying that Stewart told her that members of the Waksal family were selling their shares, Pasternak said that she believed she also heard Stewart say, "Isn't it nice to have brokers who tell you these things?" a few days later. Pasternak may be a friend of Stewart, but she declined to commit perjury on her behalf, a course of action that was "encouraged" by the SEC since they are examining Pasternak's having profited from the insider information about ImClone.

* enemies: Stewart's impoliteness to Douglas Faneuil, the broker's assistant, came back to haunt her, as Faneuil became the chief prosecution witness and the jury was treated to Faneuil's e-mail messages describing a succession of unpleasant encounters with Stewart.

The New York Times reports that Stewart rose from humble working-class roots in Nutley, N.J., to become a media mogul. She created a catering company that came to embody her clean-cut, vaguely patrician style. She would turn that into a conglomerate of publishing, television and merchandising businesses, all of them bearing her name and, usually, her photograph as well. She took her company public in 1999, as the Internet excitement peaked, and overnight became a billionaire, at least on paper. All that seems jeopardized with yesterday's verdict, at least as far as Ms. Stewart's signature control is concerned. She will almost certainly be required to step down as an officer and director of Martha Stewart Living Omnimedia, although she could continue to hold the majority of the voting shares, as she does now.

Stewart's defense in the case was hampered by adopting a mixture of storytelling options one and two. By remaining silent at her trial, she didn't give the jury much basis for accepting her story, or resolving its inconsistencies.

"I would have liked to hear her side of the story," said the juror, Jon Laskin, who was among six interviewed by the network for a segment of "Dateline NBC."

The defense gambled that Stewart's personal storytelling was unnecessary and that the jury would have reasonable doubts about the case, based on who she was -- a celebrity, who wears expensive clothes and accessories and who paraded her celebrity friends in court to show their support. The gamble proved wrong and Stewart was convicted of false storytelling.

The criminal laws of storytelling

Stewart was convicted under an important storytelling law of which most people are unaware. Lawyers call it 1001, for the section of the federal code that contains it. It prohibits lying to any federal agent, even by a person who is not under oath and even by a person who has committed no other crime. Stewart's case illustrates the breadth of the law.

Stewart was not charged with criminal insider trading, suggesting that if she had simply told investigators the truth she would not have faced criminal charges, although there is a civil suit pending from the SEC for insider trading. The only counts the jury considered related to her behavior during the investigation.

"This was a classic case of the cover-up being worse than the crime," said Seth Taube, a white-collar defense lawyer at McCarter & English, a law firm in Newark. "It's an easy case to prove a lie." That disturbs civil libertarians, who say that 1001 charges typically criminalize behavior that most people would not recognize as illegal.

"This 1001 law is really a remarkable trap," said Harvey Silverglate, a criminal defense lawyer in Boston. People lie all the time to colleagues, friends and family, Silverglate said, and unless they are legal experts they probably do not know that lying to any federal investigator is illegal even if they are not under oath.

One curious feature is that the law doesn't run in both directions. A federal agent can lie to citizens and trick them in order to get information, without risk of prosecution under the law.

Was Stewart "targeted"?

Despite the immense global publicity, in the financial scheme of things, the Stewart case is small potatoes. While the other scandals of the 1990's stock market boom like WorldCom, Adelphia, Tyco, HealthSouth, and Enron resulted in some of the largest bankruptcies and investor losses in history, involving hundreds of billionso f dollars, Ms. Stewart's trial concerned a stock sale that netted her a meager $45,000.

Ms. Stewart's supporters have contended that she was targeted, i.e. that the decision to prosecute her was motivated by the desire to take down a popular and very public female chief executive. Some say she became a target for prosecution because she supported members of the Democratic Party; others say she simply was not part of an old-boy network.

Ms. Stewart is clearly a lightning rod because she has been politically active, female, powerful and rich, and perhaps because she has managed to straddle class lines in her dual roles as a celebrity and an adviser on taste.

"She's a wonderful target to show that the administration is serious about fraud," mocked Ms. Becker, a law professor at DePaul University College of Law. "Lots of publicity doesn't disturb any of the old boys or anybody who made a significant amount of money."

While several men have been convicted in the ImClone case (Waksal, Bacanovic), there does also an element of amazement and envy that a woman could become a billionaire just from baking cookies and arranging table place mats. In effect, she has made something from nothing, just as Warren Buffett became rich simply by picking stocks, and Jerry Seinfeld from telling one-liners in "a show about nothing". In discussions of the Stewart case, there is an element of unattractive satisfaction that many reveal in seeing such a woman brought low. As the German poet Schiller pointed out, there is an unfortunate tendency in the human race "to blacken the radiant and drag the sublime into the dust"1/. If Stewart's conduct has not always been sublime, she always appeared radiant.

What is Stewart's story now?

On Friday, shortly after the jury's decision was announced, Ms. Stewart issued a statement saying that she was "obviously distressed" by the verdict and added, "I will continue to take comfort in knowing I have done nothing wrong and that I have the enduring support of my family and friends."

A short time later the statement, posted on the Web site she started as part of a public campaign to proclaim her innocence, had been revised to exclude the part about "knowing I have done nothing wrong."

Under sentencing guidelines, convicted felons who show remorse or accept responsibility for their actions can be entitled to less prison time. Defiance can lead to more prison time. If Stewart continues to tell the story that the jury rejected, she may thus face a longer term in prison, unless her conviction is overturned on appeal, which legal experts consider unlikely.

The abrupt switch in Stewart's website from defiance to silence indicates that Stewart still may not have learned her lesson as to which of the three storytelling options to adopt.

1/ Friedrich von Schiller: Das Madchen von Orleans, Read The New York Times

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