Rebuilding the 'Martha Stewart' Brand

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Case Details:

Case Code : MKTG133
Case Length : 16 Pages
Period : 2001-2006
Organization : - Martha Stewart Living Omnimedia
Pub Date : 2006
Teaching Note : Available
Countries : USA
Industry : Media, Entertainment, and Gaming

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Stewart was born Martha Helen Kostyra on August 3, 1941. She was the second of the six children of Martha and Edward Kostyra, both Polish immigrants settled in America. Her mother was a school teacher and her father was a pharmaceuticals salesman.

The family was not well to do, and all the children were expected to earn their own pocket money, save for college and do chores around the house.

Stewart did domestic chores for her mother and helped her father in the garden.

At her grandparents' house, where she spent summers, she learnt the science of canning and preserving. Her neighbors, who were retired bakers, helped her polish her baking skills. Meanwhile, she earned her pocket money by organizing birthday parties for neighboring children. These skills were to stand her in good stead in her later career as a lifestyle expert...

The Imclone Controversy

On December 27, 2001, Stewart sold 3,928 shares of Imclone, which was headed by Stewart's friend Sam Waksal (Waksal). It would have been a routine transaction had it not been made just a day before the US Food and Drug Administration (FDA) refused approval for Erbitux, a drug developed by the company to combat colorectal cancer.

Later investigations found out that Peter Bacanovic (Bacanovic), Stewart's broker at Merrill Lynch was also the broker for Imclone's CEO, Waksal and his two daughters. Bacanovic called Stewart on December 27, 2001 to tell her that he thought "Imclone is going to start trading down." Stewart was then on her way to Mexico on her corporate jet and did not immediately receive the call. She was said to have called Bacanovic back, and when he told her about Imclone, to have advised him to sell the shares. The shares were eventually sold for $58 making Stewart about $228,000...

The Trial and Imprisonment

The case went on trial in January 2004, after a long and cumbersome process of selecting neutral jurors. Apparently, Stewart's celebrity was such that it was difficult to find impartial jurors. Most of the American public were divided into two distinct camps - Martha fans and Martha haters.

At the start of the trial US District Judge Miriam Goldman Cederbaum (Cederbaum) cancelled the charges related to securities fraud which, she thought, were not strong enough to be tried. Stewart was eventually tried on four counts - conspiracy, obstruction of justice and two instances of making false statements. In essence, she was charged with lying to government investigators about what she was not guilty of in the first place - insider trading and securities fraud..

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