Martha Stewart's wild ride
Stiff challenges threaten to derail style diva
(CNN) -- It was a very "Martha" moment.
On the day she took her company public -- October 19, 1999 -- Martha Stewart celebrated by serving fresh-squeezed orange juice and brioche to the money-thirsty traders on the floor of the New York Stock Exchange.
At day's end, the share price of Martha Stewart Living Omnimedia had doubled, making her a billionaire on paper. Yet she stayed in character as America's best-known homemaker.
Stewart's dramatic ascent and creation of a multinational empire, with products in stores, magazines, online, on radio and television, also made Stewart a lightning rod for critics who derided her as a cutthroat, arrogant, money-grubbing capitalist.
Such claims reached a crescendo in late spring 2003 when, after months of media scrutiny and government investigation, a federal grand jury indicted Stewart on nine counts related to her sale of ImClone stock.
While she and her lawyers have denied any wrongdoing, the home-decorating guru and company CEO publicly has sought to maintain her carefully crafted image as expert on good taste.
"Most people don't have the imagination to mix and match bed sheets," she told Time magazine in 1997, upon launching a new effort with Kmart. "We're going to bring them along."
Feds target Martha
On June 4, 2003, a grand jury -- at the request of the U.S. Attorney's office in New York -- indicted Stewart on nine counts for securities fraud and obstructing their investigation into allegations of insider trading of shares of ImClone Systems Inc. She also faces related civil action by the Securities and Exchange Commission.
Talks between Stewart and federal prosecutors broke down when she would not agree to plead to any charge that carried the potential for jail time, the Wall Street Journal reported days before the indictment.
The actions culminated a series of probes and actions that began on December 27, 2001, when Stewart sold 3,928 shares of ImClone the day before the FDA's official rejection of the company's application for Erbitux caused its stock to plummet.
Fomer ImClone CEO Sam Waksal -- a friend of Stewart's -- was arrested June 12, 2002, on charges of insider trading and perjury. Waksal pleaded guilty October 15, 2002, to six of 13 felony counts, including securities fraud, perjury and obstruction of justice.
Douglas Faneuil, a former assistant to Stewart's broker, Merrill Lynch's Peter Bacanovic, also pleaded guilty in October to misdemeanor charges of accepting perks to keep silent about an alleged inside stock tip given to Stewart.
Stewart, who made about $225,000 in the deal, insisted she had no advance knowledge about Erbitux, saying she had an arrangement with her stockbroker to sell when the value one share of ImClone stock dropped below $60.
The indictment is just one of Stewart's troubles.
Her company's stock -- of which Stewart owns 61 percent -- fell about 40 percent last year and another 16 percent on June 3 and 4, 2003. The company itself lost money for the second straight period in the first quarter of 2003, and warned it will lose money again in the second quarter.
And Martha Stewart Living's biggest source of U.S. revenue -- Kmart, which has been associated with the style maven since 1987 -- has also fallen on hard times, emerging in May 2003 from 17 months of bankruptcy.
But, publicly at least, the decorating diva has stayed positive. In her regular appearance on CBS's "The Early Show" on June 25, 2002, Stewart said, "I think this will all be resolved in the very near future and I will be exonerated of any ridiculousness."
The investigation and indictment come on the heels of an unauthorized biography of Stewart by veteran financial writer Christopher Byron. The book, "Martha Inc.," was published in April 2002.
"She is very, very short-tempered with people, and as she's gotten older, it's gotten more so," Byron said in a 2002 interview. "Countless sources have told us that she's extremely difficult to deal with."
Byron's biography jumped near the top of the bestseller lists soon after its release, yet it also has received its share of criticism as being too harsh in its depiction of Stewart.
"In essence, the book reads like a litany of horrors," BusinessWeek associate editor Diane Brady said last year. "This is a woman whose career path to success is strewn with carcasses, and Byron has basically followed along behind her and picked everyone up and interviewed them. That's how the book reads to me."
Added Brady, "For all her faults, she has a fairly loyal following around her ... It would be nice to hear what they have to say."
Byron says those people would not talk to him once he was frozen out by Stewart.
Stewart's own net worth has suffered immensely, as her company stock has come down from that heady day in 1999, falling along with the rest of the market and in tandem with the scandal surrounding its founder. Stewart's holdings in her own company have taken more than a $200 million hit, wiping out more than a quarter of her net worth, according to one estimate.
Yet Stewart has weathered challenges for decades, rising to the task at hand ever since childhood.
In her father's garden
She was born as Martha Kostyra in 1941 to a working-class family of Polish ancestry living in New Jersey. When she was a toddler, her family moved to the suburban town of Nutley, located about 20 minutes west of New York City.
The Kostyras lived in a modest, three-bedroom home, where she and her five siblings grew up.
Stewart has credited her parents, in particular her father, with instilling in her a drive for success and perfection.
Stewart recalled her first day of work in the garden with her father in a February 2002 interview on CNN's "Larry King Live."
"We had this cobblestone path in our garden, and it had weeds in it," she recalled. "And he said, 'Take out all the grass.' I think I was three. So, I sat there all day, and I became his pet because of that."
According to Byron, Eddie Kostyra cut a sad figure -- a man with a drinking problem who had dreamt of being a doctor, but was forced to settle for a job as a pharmaceutical salesman, enduring the grind of commuting into New York City.
"Martha's ex-husband, Andrew Stewart, referred to him as a Willy Loman figure who just sort of stumbled downhill through life until he finally wound up at the ultimate dead-end job," Byron said.
But her father's drive may have helped Stewart succeed in school. She was an A student in high school. She was quoted in her yearbook as saying, "I do what I please and I do it with ease."
Her good grades helped her get accepted at Barnard College in Manhattan, one of the nation's top women's colleges.
To help cover her college expenses, the attractive young Stewart began modeling. She appeared in ads for Tareyton cigarettes, Lifebuoy soap and she became a Breck girl. She got one of her big breaks when she was named as one of Glamour magazine's "Best Dressed College Girls of 1961."
"This was unquestionably one of the major turning points in her life because it lifted her onto a national stage," said Byron.
Her modeling career was thriving when she, at the age of 19, married Andrew Stewart, who was then a law student. On her wedding day, she carried daisies.
Having given up modeling and taken on a new name, she gave birth to her only child, a daughter named Alexis, in 1965.
But Stewart was not about to become a stay-at-home mom. In the next few years, she reinvented herself, becoming one of the first female stockbrokers on the floor of the New York Stock Exchange.
"She was a stockbroker in a miniskirt and drop-dead blond good looks, and did really well," Byron said.
In a few years, when the market turned sour, Stewart made another major change: She and husband Andrew put down $34,000 and bought an old, dilapidated house in Westport, Connecticut.
They renovated the house themselves and named it Turkey Hill Farm. And there, they laid the foundation for what would eventually become a multimedia empire.
From Wall Street to the kitchen table
Stewart, the former model and stockbroker, had a new career in mind: catering.
Headquarters was the kitchen at Turkey Hill Farm. She baked breads, whipped up chocolate mousse, and set pretty tables. She learned to present the perfect party.
In 1982, she parlayed her skills as a hostess into a new book. Titled "Entertaining," the book has sold more than a million copies.
She dedicated the book to her father, who had died in 1979, and to her daughter, Alexis, for her patience.
"Her daughter essentially has told me that there is not 10 seconds when her mother has not thought about the business growing up," Brady said.
Stewart has said Alexis and others close to her have grown accustomed to her jam-packed schedule.
"They're pretty used to my workaholic schedule," she has said. "My life is my work and my work is my life."
In 1987, her personal life took a blow. Her marriage ended when Andrew Stewart left Turkey Hill Farm. Six years later, he married a woman who had been a flower consultant to Martha.
Martha just kept on working. That year, she began her association with Kmart and she continued to write more books. Working with Time Warner (the parent company of CNN), she created a new magazine, "Martha Stewart Living."
The magazine became a big success.
"She sort of hits a common nerve in a lot of people," said Brady. "A friend of mine calls it homemaker porn. Essentially, it's aspiring to a lifestyle that you can't have ... It's a fantasy world."
Her ventures branched out into television when she landed a deal with the "Today" show. And she soon had her own weekly show in syndication.
In 1996, her profile had grown so much that Time magazine named her one of the most influential people of the year.
Before the insider tradition scandal broke, Byron called Stewart "the living embodiment of Queen Midas."
"Everything she touches turns to gold," he said.
Success has allowed Stewart to live the life of luxury that eluded her working-class parents. Her possessions include a 36-foot picnic boat that she bought after taking it out for a test drive to see if her two beloved chow-chow dogs would like the ride. And she owns a 61-acre estate on Mount Desert Island, Maine.
The estate, called "Skylands," is a very private summer retreat where she walks on century-old carriage roads that were designed by John D. Rockefeller, an earlier island resident.
Stewart's success also has rubbed off on many who have come into her sphere. Exposure in her magazine or on her television show, for example, has created huge demand for little-known products.
Lisa Hall, who also lives on an island off Maine and crafts one-of-a-kind jewelry, has experienced that first-hand. One of Stewart's editors saw Hall's jewelry in a gift shop and thought it would make a good story.
Her work was featured on Stewart's TV show and in her magazine. Almost immediately, dozens of visitors began arriving daily by boat to the isolated island, eager to buy her jewelry. They'd trek a mile up a path to her studio and knock on the door.
"'I saw you in Martha' is what they say, or 'On Martha.' So, it's great," Hall said in an interview. "Martha is very far-reaching. She touches a lot of people."
Stewart's audience is, indeed, a global one. For example, her brand can now be found in over 200 stores in Japan, where her magazine and TV show are also popular.
Yet the core of Stewart's business remains in the United States, in particular, at Kmart, the struggling retailer with whom she has aimed to bring style to the masses. The chain accounts for a substantial amount of her company's profits, making the retailer's current troubles a worrisome problem.
"Martha Stewart Living Omnimedia has never faced a more serious challenge to its business structure and its fundamental financials than it now faces in the Kmart bankruptcy," said Byron. "Anybody who's bet against Martha Stewart in the past has been wrong, but the stakes are higher here now."
So far, Stewart has stood by Kmart, though she's legally free to sign with another retailer.
"We have been with them for 15 years," she said on "Larry King Live." "It's pretty hard to run out on a partner that's down. You know, that's not our style."
Even now, at 61, Martha Stewart retains the determination she showed as a little girl, working hard in her father's garden -- still a perfectionist, seeking to succeed.