Martha Stewart is close to an agreement with Martha Stewart Living Omnimedia Inc. that would allow her to continue to play a role at the company she founded despite her criminal conviction last week, according to people familiar with the talks.
Stewart, who built a media and consumer products empire on lifestyle tips for gracious living, could face prison time after she was found guilty of lying to investigators in connection with a suspicious stock sale.
While the outcome of talks between lawyers for Stewart and the company of which she is the controlling shareholder is uncertain, Stewart appears likely to maintain a diminished though still important role, the sources said.
"She will end up continuing to play a creative role at the company," said a person familiar with the talks. "She will not be an officer or a director, but she will be very involved in the company."
The talks between Stewart and Omnimedia come amid doubts about the direction and future of the company. Stewart, 62, was convicted last Friday of conspiring with her former Merrill Lynch stockbroker to hide the reason behind her sale of shares in the biotech company ImClone Systems Inc. on Dec. 27, 2001.
She was found guilty of one count of conspiracy, two counts of making false statements and one count of obstruction of agency proceedings.
Since her conviction, it has been unclear whether Stewart would remain at Omnimedia despite holding 61 percent of its voting stock.
The company is expected to make an announcement about her role in coming days, the people said. Talks, while well advanced, could still collapse, they said.
"It's not a done deal," one person close to the talks said.
Despite the pall of the conviction, investors say Omnimedia is in good financial shape, with about $169 million in cash and virtually no debt.
Whether customers will stand behind the company's name-brand products remains to be seen. Its most prominent client is discount retailer Kmart Holdings Corp..
"I think if they manage this transition with a fair amount of dignity, they will be fine," said William Brandt, of the Chicago-based restructuring firm Development Specialist Inc. "Insolvency is not in the cards."
Shares of Martha Stewart Living rose 43 cents to $10.25 on the New York Stock Exchange on Thursday. They have dropped 27 percent since March 4, the day before the verdict.
