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LIVE FROM THE HEADLINES

Martha Stewart Claims Innocence; Interview With Eric Dezenhall

Aired June 5, 2003 - 19:01   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ANDERSON COOPER, ANCHOR: We begin with a couple of big names in the hot seat. In a few minutes, another black mark for the Gray Lady, as scandal claims the top job at "The New York Times."
But first, another scandal. A day after her charges related to a controversial stock sale, Martha Stewart is going on the offensive.

CNNfn's Mary Snow has that story.

(BEGIN VIDEOTAPE)

MARY SNOW, CNNFN CORRESPONDENT (voice-over): Martha Stewart is fighting back after her indictment on five criminal counts. She took out a full-page ad in "USA Today" and created a web site thanking supporters.

Quote, "I want you to know I'm innocent and I'll fight to clear my name."

The domestic guru has stepped down as CEO, but she hasn't stepped out from the company. She's remaining on the board and becomes chief creative officer.

And she is not only managing her public image carefully, but she's ensured her workers' silence on the matter. When you work for Martha Stewart, you keep quiet. Employees tell CNN they've had to sign confidentiality agreements.

As for what's next, new CEO Sharon Patrick has the formidable task of selling Martha, the merchandise.

ROBERT PASSIKOFF, PRESIDENT, BRANDS KEY: This is a textbook case of a brand being imbued almost entirely in a human being and when Martha Stewart, the woman, was indicted yesterday, the brand was indicted, as well.

SNOW: A consumer loyalty index shows strength in the Stewart brand slipping from an all-time high before she was publicly linked to the ImClone stock scandal to a point much lower.

An indictment in the Manhattan courtroom is reaching the aisles of a Chicago area K-Mart where Stewart's brands are sold.

UNIDENTIFIED FEMALE: I think she's done a lot for K-Mart and for the K-Mart image, and I was just talking to my mom yesterday about it, and we both said, well, we really like her things, so I'm going to keep on buying them. UNIDENTIFIED FEMALE: Kathie Lee, when they found out how she was getting her products, I didn't buy that stuff anymore. And so the same thing with Martha Stewart. I just can't do it.

SNOW: One industry watcher says to survive, Martha Stewart the face has to be disconnected from Martha Stewart the brand.

TOM JULIAN, FALLON WORLDWIDE: By separating it, you're able to live in the world that she created: the kitchen, the bathroom, the garden. And those are all very viable retailing entities now. Keep those products alive there, but just take her face and voice out of it.

(END VIDEOTAPE)

SNOW: Here outside the headquarters of Martha Stewart Living Omnimedia, things appear to be business as usual.

Now, the next step comes June 19, when a pretrial hearing is scheduled. And as for the trial itself, Martha Stewart acknowledged in her letter today that the trial isn't expected for months -- Anderson.

COOPER: Thanks very much for that report.

Let's talk some more about how to save brand Martha and keep her name and her company going in spite of her legal mess.

Eric Dezenhall is the founder of a crisis management firm. He's also the author of "Jackie Disaster, a Novel about Damage Control" and also "Nail Them."

Thanks for being with us, Eric.

ERIC DEZENHALL, "JACKIE DISASTER" AUTHOR: Thank you.

COOPER: Let me start off with this full-page "USA Today" ad SHE took out basically saying she's innocent. Is that the right way to go?

DEZENHALL: Well, I think it has to be. You have to keep in mind what we're dealing with here, which is not just one crisis, but three. You have a businesses crisis, you have a celebrity scandal and a cultural phenomenon.

And what I mean by that is we are operating in a climate where people desperately want to see corporate crooks go to jail, whether they're guilty or not. We just want to see blood being taken.

I think that what she's doing, you have to keep in mind, that she really can't speak in an interview. You keep hearing things like, if he had only do a mea culpa early on, none of this would have happened. That's absolutely ridiculous.

COOPER: And in fact, some of these charges are based on the public statements she made immediately after this crisis surfaced. DEZENHALL: I don't know any lawyer with an I.Q. higher than plant life who would let her go on television and do an in-depth interview. It is absolutely lethal.

COOPER: So what should she do?

DEZENHALL: Well, what she's doing is she's communicating in controlled environments. She did an ad; she's doing a web site. And what this is designed to do is communicate to the extent that she can. And what it's designed to do is introduce risk to her attackers.

And what I mean by that is, right now what she has to be able to do is to get the Justice Department and potential juries thinking her way.

And the Justice Department gave away their greatest worries in their news conference yesterday. They said, this is not about her being a woman, and it's not about her being a celebrity. The third thing that they did is they didn't put her in handcuffs. And what that tells you is they are very, very worried about looking heavy- handed.

COOPER: To me, any time I hear someone say, "It's not about this," I often think it is about that.

DEZENHALL: Yes. That's exactly right. And they are very concerned at the Justice Department that there are people who believe that, given all the corporate scandals that are happening, that you go after Martha Stewart, because she's a very successful woman.

And what they have to do -- What her team has to do, and they're beginning to do is hammer the thing that the Justice Department fears, which is a revolt by women and by consumers that this is overkill.

COOPER: But also, you bring up an interesting point early on. You said, look, she's a brand, she's a company, she's a person. She's got to fight this thing on all these different fronts, or respond to these things on all different fronts.

Normally, I guess you would counsel, "Look, just fight the legal strategy, deal with the P.R. battle down the road." But can she afford to do that? Does she have to keep doing these limited exposure things, P.R.-wise?

DEZENHALL: Well, she really does, in the absence of some information that I really don't know about. You have to remember her company is not called Amalgamated Omnimedia; it's called Martha Stewart Omnimedia. And when you have this combination of a celebrity scandal and a corporate crisis, she can't just say, "Oh, I'm naming a new CEO and I have nothing to do with this." She has to try to do both at the same time.

I mean, when you have a corporate scandal that does not involve, you know, the personality of the CEO in this way...

COOPER: Right. DEZENHALL: ... you can just replace them with somebody else. She really doesn't have the option. What her option is, over the long-haul, is to become like Betty Crocker, a name that we know, but not a personality that we know.

COOPER: Interesting to see if that will actually happen. Eric Dezenhall, I appreciate you joining us. Thank you very much.

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