America has always had a love-hate relationship with Martha Stewart, with her maddeningly perfect hand-carved ice wreaths and Scandinavian cloudberry cakes. But now the multimedia domestic goddess is serving up a tasty new dish the tabloids are devouring. Here’s the recipe for what the New York Post calls “Martha’s Stewing.” First, whip in the Wall Street scandal du jour: the arrest last week of Martha’s old pal, former ImClone CEO Samuel Waksal, for insider trading. Then, stir the pot with tidbits about Martha’s relationship to Waksal (is it romantic?) and a suspicious phone call she made to him the day she cashed in her ImClone stock for $227,824. Next, fold in the bankruptcy of Kmart, which is closing hundreds of stores, losing billions and still peddling Martha’s stylish housewares. And finally, spice with “Martha Inc.,” the gossipy new bio that portrays her as a foulmouthed, manipulative shrew who dumped her husband for, among other transgressions, not stacking the firewood just so.
The gossips may love it, but this recipe adds up to trouble for Martha. In her well-mannered world, image is everything. And even if her ImClone-stock sale was legit–as she insists–the perception of dirty dealing could finally tarnish Martha’s Midas touch. Wall Street, which embraced her 1999 initial stock offering, has begun to turn up its nose. Martha Stewart Living Omnimedia stock has fallen 20 percent since the ImClone affair erupted June 6, sinking the value of her personal holding by more than $100 million. “Her asset is her image,” says brand consultant David Martin of Interbrand. “As soon as that image gets cracked, what else is there?”
Notoriously controlling, Martha always has the final word on everything in her empire. Congress won’t be so accommodating. Her lawyers have told congressional investigators that Martha phoned Waksal Dec. 27 from San Antonio, Texas, as her private plane refueled on the way to a holiday in Mexico. She says she didn’t get through to Waksal and he didn’t call back. But congressional investigators want to know why she was calling him as she was unloading 3,928 shares of ImClone–one day before news that federal regulators nixed its promising cancer drug sent ImClone stock tumbling. “The timing of that call and the sale of her stock have raised some eyebrows,” says congressional spokesman Ken Johnson. “We simply are trying to corroborate her story.” Stewart wouldn’t elaborate beyond her statement saying she had a standing sell order with her broker to cash out of ImClone if it fell below $60, which it did on Dec. 27. She contends she dumped the stock moments before phoning Waksal.
Then there’s also the intriguing question of the nature of Martha’s relationship with Waksal. Various accounts say he dated Martha or her daughter or both (yikes!). Martha denies dating Waksal, and has said “we’re just good friends.” But she has joined other A-list celebrities at Waksal’s elegant soirees in his art-filled loft in New York’s trendy SoHo district. Waksal, who took the fifth before a congressional panel last week, is also mum on Martha.
But don’t count her out. She clawed her way up from humble beginnings in New Jersey (working as a stockbroker along the way) to create a $295 million company to tutor us on everything from stenciling gift-wrap to shucking peas. And she just told analysts that advertising is up in Martha Stewart Living, which should lift profits. “I really am extremely hardworking,” Martha says in Rosie magazine. “I… deserve good success and financial reward.” Now if she can only find a way to restore her image.
