Stewart's comeback from prison carefully calculated

"It's one of the most remarkable turnarounds I've ever seen," said Allan Mayer, managing director of Sitrick and Co., which has handled damage control for such clients as Rush Limbaugh and Paula Poundstone. "When people saw she was going to suck it up and go to jail, they thought, 'Maybe she is arrogant. Maybe she is overbearing. But she's taking it like a grown-up.' "

When Stewart leaves the federal Alderson Prison Camp next weekend, she will become the star of two new TV shows on NBC. In one, she revives her daily homemaking show and in the other she will test and ultimately select a new employee a la Donald Trump on "The Apprentice."

On Wednesday, her company's chief executive, Susan Lyne, predicted ad sales in Stewart's magazine would increase with her "unencumbered return." The same day, share prices reached $37.40, the highest in five years.

In a matter of months, Stewart's image has morphed from that of a petty, condescending perfectionist whose wealth and prestige had so isolated her that she had no real empathy for, as one juror put it, "the little people," to a gutsy broad who took her lumps like any other citizen. "See what one can do with nothing?" she told Living magazine editor Margaret Roach in a letter from prison.

Martha reshaping Martha

Although luck and timing played a role, Stewart's comeback is based on a carefully calculated strategy involving crisis management teams, attorneys, friends, family and the one person who understood Stewart's image better than anyone: Martha Stewart.

"She seemed too perfect," said Walter Dellinger, a Washington attorney handling the March 17 appeal of her conviction. "Her life seemed too good. ... Now she can be seen as someone who can come back from very tough places."

Stewart's fall from grace began in June 2002, when the government launched an investigation into her sale of about $45,000 worth of shares in the biotech company ImClone Systems Inc. the day before a negative federal ruling on its cancer drug caused the stock to plunge. It looked as if she'd received an illegal tip, but Stewart seemed to ignore the seriousness of the allegations.

For the most part, her New York damage control firm, Citigate Sard Verbinnen, kept her under wraps. On June 4, 2003, Stewart was indicted. She was not charged with insider trading but with conspiring with her broker to make it appear that her ImClone trade was unrelated to the FDA ruling and then lying repeatedly to federal investigators.

That day, the Citigate Sard Verbinnen team launched a Web site, marthatalks.com. There they began posting open letters from Stewart, fan mail, legal briefs and case updates. The site received nearly 2 million hits in its first 17hours.

Stewart agreed to TV interviews with Barbara Walters and Larry King. Yet try as she might, Stewart seemed incapable of channeling warmth or provoking much sympathy.

"Martha Stewart has an interpersonal cadence that's very patronizing," said Eric Dezenhall, president of the Washington-based corporate crisis management firm Dezenhall Resources. "That's a personality thing. Oprah Winfrey would have done a lot better because Oprah Winfrey has certain vulnerability - her ethnicity, her weight, her disastrous romances. But Martha is always telling us she's better than us."

Guilty on all counts

Stewart was convicted in March 2004 on all counts - conspiracy, obstruction of justice and lying to investigators. Her company's shares plummeted 23 percent that day, and Stewart lost $95 million on paper. She soon resigned as director and chief creative officer of her company and from the board of Revlon.

Viacom pulled her TV show, "Martha Stewart Living." Stewart's magazine dropped her monthly editor's letter and planned a redesigned cover that downplayed her name.

Last July, she was sentenced to five months in prison, a $30,000 fine, five months of home confinement and two years of supervised probation.

Stewart didn't bemoan her fate. Instead, during a news conference on the courthouse steps, she urged her supporters to help "by subscribing to our magazine, by buying our products, by encouraging our advertisers to come back."

"I'll be back," she promised.

Her company stock rocketed up 37 percent that day.

"She was not haughty," said Gerald McKelvey, crisis PR manager at the New York firm Rubinstein Associates. "She wasn't imperious. She did not act as though she was entitled to some sort of special consideration."

Crisis management experts say the turning point in Stewart's public rehabilitation came in September, when she asked to begin her sentence immediately. Many of her attorneys wanted to appeal the conviction.

But Stewart made a business decision, those close to her said .

She said she wanted her release to coincide with spring planting.

"I must reclaim my good life," she told a federal judge.

Going to prison

She entered prison in October, giving Martha Stewart Living Omnimedia advertisers and investors a finite end to the ordeal. The day she was ordered to report to prison, her company stock surged 12.5percent.

Within weeks, the news turned to Stewart-as-humble prisoner, using her daily power walks to gather dandelion greens and wild onions, requesting yogurt for prison vending machines and comforting one weeping inmate with a yoga lesson. She took to her chores - cleaning the grounds and the administrative offices - dutifully and, according to one report, even offered a lesson to other inmates on the value of turpentine. After one visit, Barbara Walters reported Stewart "loves scrubbing the floors in the bathroom" and "misses absolutely nothing material."

Tabloid photos depicted a wan-looking Stewart in oversized prison garb, wearing large, clunky glasses (contact lenses weren't allowed), no makeup and really bad hair. She craved visitors, one friend said, because they provided the only time she could access the vending machines, which offered the prison's most palatable food - chicken wings. Stewart and her friends and relatives began describing her prison term as a much-needed respite from the world, time to catch up on sleep, drop those 20 pounds and finally master the art of crochet.

"I have had time to think," Stewart wrote in a posting on marthatalks.com, "time to write, time to exercise, time to not eat the bad food and time to walk and contemplate the future."

5 months of house arrest

For the five months following her prison release, Stewart will remain under house arrest and must wear an electronic anklet to allow authorities to monitor her movements. But friends say she'll jump right back into the business, working from her 153-acre estate in Bedford, N.Y., when she's not at the office during the 48 hours a week outside the home that her sentence permits. She'll also start drawing her $900,000-a-year salary again.

Stewart will be free to entertain colleagues, neighbors, friends and relatives as long as they are not criminals. Convicted felons are not allowed to consort with convicted felons.