AMERICAN MORNING

Interview With Foster Winans, Larry Barcella

Aired June 5, 2003 - 08:04   ET

BILL HEMMER, CNN ANCHOR: Back to the Martha Stewart matter right now. She stepped down as chairman and chief executive officer of the company she founded after being indicted yesterday on federal charges. She's accused of conspiracy, securities fraud, obstruction of justice and making false statements.
Prosecutors say the case is not about celebrity, but rather about a cover-up. They say she is simply lying.

Stewart pleaded not guilty.

Let's talk about it now.

Back in New York, the author of "Trading Secrets" with our guest, from New York, is Foster Winans.

Foster, good morning to you.

FOSTER WINANS, AUTHOR, "TRADING SECRETS": Good morning.

HEMMER: Good to have you with us here.

Also back in D.C., the attorney, Larry Barcella, a former federal prosecutor who now defends those accused of white collar crimes.

Nice to see you, Larry, as well.

Is she going to jail?

LARRY BARCELLA, ATTORNEY: Well, certainly the way the government charged the case, they did not charge her with insider trading, which, as you know, is what the whole hype had been about. They charged her with lying. They charged her with conspiracy to obstruction of justice and they charged her with securities fraud. And it's a rather unique theory. And the way they did it is to significantly enhance the potential punishment if she does get convicted.

HEMMER: Of those charges you just mentioned, what's the most serious right now?

BARCELLA: Well, the most serious in terms of potential sentencing exposure is the securities fraud, and that's why they charged it. It's a very unique theory. They basically said her proclaiming her innocence was a way of sort of misleading the market, misleading the Street with respect to her company. And, therefore, the amount of loss suffered by the company could translate into a very hefty sentence. HEMMER: I want to get back to the whole issue about lying in a second. But to Foster in New York, there are a number of people out there who say this woman has not been treated fairly, it took 18 months to bring the charges of yesterday.

Is there truth in that or not?

WINANS: Well, I don't see it as a matter of fairness. I think if this is a a publicity stunt, it'll end up being a show trial. This is a case that should have been settled almost a year ago. It reminds me of my case, in which they brought a novel legal theory during an atmosphere when they could take advantage of a lot of publicity, they being the U.S. government.

HEMMER: You know, OK now, this whole issue about lying, does it simply come down to the case of if Martha Stewart had told the truth 18 months ago that we would not even be in this scenario today?

BARCELLA: Well, you're making an assumption that she didn't and the fact is is that if you read through a very long indictment, 41 pages for something like this, it comes down almost exclusively to her word and her broker's word versus that of the broker's assistant. And so you have basically a swearing contest.

HEMMER: Yes, Foster, do you believe this is a woman who might end up in jail?

WINANS: Oh, absolutely. I am not a lawyer, but I think that they've got her and I think that she's going to end up doing a little bit of time.

HEMMER: Hang on a second. You say they've got her. How so?

WINANS: I think obstruction of justice is very hard to beat. I mean if you shred a document, if you change something. It's easier to get out of an insider trading charge. It's very difficult to get out of an obstruction of justice charge.

HEMMER: Yes, OK, now, as you look at this, Foster, right now, and you watched everything go down yesterday, how hard does she fight this and how does she fight it?

WINANS: I think she's running a campaign that has to do with sentencing as opposed to her trial. You can attempt to influence the judicial system a little bit by publicity. But it seems to me that at some point she's trying to minimize this, the impact for the end game.

HEMMER: Yes, I want to read a statement to our viewers. Her attorneys put this out yesterday. Quoting now, "We ask the public to withhold judgment until the government's unfounded charges are publicly aired and refuted. When this happens, we are convinced that justice will follow and Martha Stewart will be fully exonerated."

Can she beat it, Larry?

BARCELLA: She can beat it if she gets the jury to believe her and not believe the broker's assistant. It almost comes down to that.

HEMMER: That simple.

Thanks, Larry Barcella here in D.C., Foster Winans, author of "Trading Secrets," back there in New York.

Thank you, gentlemen.

WINANS: You're welcome.