Martha Stewart's Empire Became More Successful After She Went to Prison

Shannon Raphael - Author

May 4 2020, Updated 3:28 p.m. ET

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Lifestyle expert and chef Martha Stewart is known for her decadent recipes, her high standards, and her brutal honesty. As the founder of the Martha Stewart Living Omnimedia, she's created an empire that encompasses magazine publishing, multiple cooking shows, and merchandise. 

While she is one of the top household names when it comes to the food world, there was a time when many wondered if her brand would make it as a result of her legal issues.

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In 2004, Martha began serving time in prison after she was found guilty of insider trading. Her brand, which is centered on her name, was at risk of crumbling while her character was questioned. But, she proved the doubters wrong, and her empire only grew with success in the years since she served time. 

Why did Martha Stewart go to prison? Read on for the refresher on the Martha Stewart Living creator's legal issues.

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Why did Martha Stewart go to prison?

In December of 2001, Martha sold almost 4,000 shares of ImClone Systems, which was a biopharmaceutical company that specialized in creating oncology medication. The day after she sold her shares, the company's stock value dropped 16%. If Martha had kept her shares, she would have lost more than $45,000 as a result of the drop in value, according to the Securities and Exchange Commission (SEC).  

The chef had been advised by Peter Bacanovic, her broker at Merrill Lynch, to sell her ImClone Systems share when she did.

Following the news that Martha had conveniently dropped her shares right before a big drop, the media scrutinized whether she had received insider knowledge. Though she was asked on air to respond to the insider trading allegations, she chose to remain silent. This only fueled the speculation. 

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In October of 2002, Martha stepped down from her board of directors position at the New York Stock Exchange because her legal team had struck a deal with Peter Bacanovic's assistant, Douglas Faneuil. 

Six months later, in June of 2003, she was indicted on nine counts, which included obstructing justice and security fraud. She stepped away from her CEO position at the Martha Stewart Living Omnimedia, but she remained on as the chief creative officer. 

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Her trial began in January of 2004, and evidence came out that Bacanovic was given information that ImClone's CEO, Samuel Waksal, was selling all of his shares in the company. The company had lost a crucial battle with the FDA, and Waksal alerted Bacanovic ahead of the publicization of that news. Bacanovic then advised Martha to sell her shares. 

In March of 2004, Martha was found guilty of multiple felony charges, including making false statements, obstructing proceedings, and conspiracy. 

By July of that year, she was sentenced to serve five months in a federal prison. Following her release, she had to wear an ankle monitor for several months, and she was on a supervised release for two years. 

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Where did Martha Stewart serve her prison sentence?

When Martha was sentenced, she requested to serve her prison time in either Florida or Connecticut, so her elderly mother would still be able to easily visit her. One of the options was FCI Danbury, which is the facility that Piper Kerman served in, which she wrote Orange Is the New Black about. FCI Danbury was Martha's first choice. 

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There were concerns that there would be a media circus if Martha served at FCI Danbury. This, combined with the speculation that the judge wanted to make an example out of her, led her to be sentenced to serve time in Federal Prison Camp, Alderson, which is in West Virginia. 

In October of 2004, Martha began her sentence, and she later stated that she forged strong connections with the other inmates while she was in prison. In March of 2005, she was released. 

Following her release from prison, the 78-year-old went to work on expanding her empire and planning her comeback. She launched her talk show, The Martha Stewart Show and The Apprentice: Martha Stewart (RHONY alum Bethenny Frankel came in second place). 

She released several cookbooks and she expanded a line of merchandise at KMart. In the years since her initial return, Martha has teamed up with Snoop Dogg for Martha & Snoop's Potluck Dinner Party and her magazine is now released on a quarterly basis.

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