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Coffey: 'Resounding triumph for the Department of Justice'

Legal analyst Kendall Coffey
Legal analyst Kendall Coffey

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(CNN) -- Lifestyle guru Martha Stewart was convicted Friday of conspiracy, obstruction of justice, and making false statements to investigators.

Immediately after the guilty verdicts were announced, legal analyst Kendall Coffey described to CNN anchor Kyra Phillips what the verdicts could mean for Stewart and for her company, Martha Stewart Omnimedia.

PHILLIPS: Let's talk about each one of those counts and what this means now for the domestic diva.

COFFEY: Well, conspiracy, two counts, false statement, obstruction of justice. It means she's not going to be in a significant role again in a publicly traded company.

It means that, unless this is somehow undone on appeal, she's a felon and she's going to prison. There's going to be a whole separate process in terms of what that sentence might be, but it's not going to be probation. It's not even likely to be a "Club Fed" kind of thing. She's actually going to be going to a real prison, like a real criminal.

PHILLIPS: Now I'm being told that trading has been halted on Martha's stock. What does this mean now just for everything that has her name, her brand, her reputation, her company stock now being -- or trading halted now on Wall Street.

COFFEY: Well, it's going to be devastating, because her company is so identified -- that is a company that is really she, herself, and Martha Stewart. And with her no longer able and even in a future capacity to become a CEO, with her reputation absolutely in tatters and shattered right now, that company is obviously facing an extraordinary, extraordinary challenge.

Meanwhile, for Martha Stewart and Peter Bacanovic, this has got to be a shocking, devastating moment beyond anyone's worst nightmare. And it's gradually sinking in on both of them that everything they've done in their lives is being turned upside down and that they will be, at some point, led into a jail and put behind bars, unless there is the highly unusual result of a reversal on appeal.

They still have appellate rights, of course. But, Kyra, the percentage chances of getting a case, especially this one, where the judge was very careful, thrown out by an appeals court is not good at all.

PHILLIPS: Now, looking as we see each count come up one by one that she has been found guilty of, we're talking about five years, maximum penalty five years prison, $250,000 fine.

Realistically, though, Kendall, how do you think it's going to play out? Do you think -- how long -- well, do you think she will spend time in jail, for how long, realistically, and the fines?

COFFEY: She's going to take -- definitely spend time in jail, Kyra. It's not going to be five, five, five. You don't simply add up the four five- year sentences, because what they do now is an analysis of the conduct.

And there's actually a point system, where something prepared called a pre-sentence investigation report prepared by an arm of the court will actually do a numerical calculation. And that number of points will take the judge to a recommended zone of months. At the very low end, what she's facing could be 10 months to maybe 16 months.

But there are a lot of ways where that range could be calculated much higher, perhaps a year and a half to two years. And we talked about a little earlier, Kyra, something called relevant conduct. It's the big and terrifying wild card in all these sentencing controversies from the standpoint of a defendant, because it means even conduct that a defendant was acquitted of -- in this case, the judge threw out the securities fraud -- that conduct can still be brought in, in sentencing if the government wants to really hammer Martha Stewart and put her away for a number of years.

PHILLIPS: All right, so now the wild card does come into play.

COFFEY: It can be considered. We don't know what the government's position is going to be on that.

They may take the view that, look, they have hammered her enough, that they have proven their point beyond anyone's expectation. This is a resounding triumph for the Department of Justice, the first really high-profile case in any of these corporate corruption scandals, not an easy or surefire case for the government. And they couldn't have won it more impressively, all four counts sustained against Martha Stewart, other than the very controversial novel securities fraud count.

By any measure, this is a huge day for the Department of Justice and for the federal prosecutors that so relentlessly and effectively pursued Martha Stewart and Peter Bacanovic.

PHILLIPS: Kendall, you were mentioning that this is quite a historic day for the Department of Justice. I'm just wondering, is this a pretty historic day for corporate corruption cases? What does this mean? What kind of message does this send out to stockbrokers, to company CEOs? Will it make an effect, do you think, as we move forward when it comes down to how corporations operate?

COFFEY: Well, I think, in the short term, it will.

We've seen other situations where there have been very impressive waves of prosecution that get everybody to behave better or at least more carefully for a while. It has to be pursued year after year, though, because, let's face it, 10 years from now, they're not going to be talking about the Martha Stewart case.

But the immediate impact is dramatic and an extremely positive thing for the Department of Justice. Let's consider other people who are in the position of a Peter Bacanovic, somebody that's being told, "cooperate with us. You'll get less time. We're not going to give you a free pass. We're not going to give you a get-out-of-jail-free card. But you're going to do a lot less time if you cooperate with us." Take your chances and look what happened to Peter Bacanovic.

There's no doubt, Kyra, he had offers to cooperate against Martha Stewart. He decided to roll the dice. Now he's going to jail for years. On the other hand of it, with respect to a Martha Stewart, I think the message is going to be, don't think that you are smart enough and clever enough to get beyond the ability of federal investigators at this point. They did a number of sophisticated and relentless things. They also proved, in the final analysis, that, when they brace and when they interrogate even your best friends, they're going to get evidence and they're going to get to the truth.

Martha Stewart no doubt, based on this jury verdict, thought that she and Bacanovic would come up with a story. All their friends would stand by them. Douglas Faneuil would wave the flag everybody else was. But when the feds put the heat on, all of that crumbled. And I think that's something that everyone in corporate America's going to have to remember.


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