Martha and the pros of being a con

They say that crime doesn't pay. But during the five months that America's domestic goddess has spent in prison for insider dealing, the value of her company has tripled. David Usborne reports on a very lucrative rehabilitation

America is about to witness the beginning of the most carefully scripted rehabilitation of a celebrity business personality ever attempted. Everything was prepared for the moment that Martha Stewart, the disgraced diva of domestic perfection, walked free overnight from the low-security prison where she has languished for five months after her conviction last July on obstruction of justice charges.

America is about to witness the beginning of the most carefully scripted rehabilitation of a celebrity business personality ever attempted. Everything was prepared for the moment that Martha Stewart, the disgraced diva of domestic perfection, walked free overnight from the low-security prison where she has languished for five months after her conviction last July on obstruction of justice charges.

The survival of the company she founded, Martha Stewart Living Omnimedia, with its magazine, home furnishings and television businesses, will depend on how well her release and her reintroduction to an intensely curious American public is managed. The signs, so far, are surprisingly encouraging. The shares in her company have tripled since her conviction on the expectation that she will quickly get past the time of humiliation her friends quaintly describe as her "intermission".

That her prospects should hold so much promise is a commentary on a country that prides itself on giving second chances. Only in America could someone as tarnished as Stewart resurface smiling, confident her fans will re-embrace her. Only in America could a convicted felon who once self-depracatingly compared her prison ordeal to that endured by Nelson Mandela resume drawing her $900,000 (£472,000) salary the day she leaves jail and begin again as if nothing had happened. Or at least try to.

It is not just that she has achieved her personal goal of regaining her freedom in time for the spring growing season at the country estate she will be inhabiting amid the horse pastures of Bedford, 50 miles north of New York City. Hundreds of sachets of seeds have reportedly been delivered and the greenhouse is crammed with young plants and bulbs. It is also that she has a full calendar of business commitments to attend to, not least preparing to star in two new television series to be aired in the autumn.

Experts in personal image management are waiting to see how the recrafting of Stewart plays. Her handlers face multiple dilemmas. To what extent should she eat humble-pie in front of her audience? Should she talk openly about her experiences in prison, or would it be better that she say as little about it as possible in the hope that people will magically forget she was ever there? Should it be a chagrined Stewart we meet this weekend, or a blithely confident one; in other words the one we used to know?

The rest of us were not even in the loop about exactly when inmate 55170-054 would formally bid farewell to Alderson Federal Prison Camp in West Virginia. Her five-month sentence runs out on Sunday, but because her last day as a guest of the government is at the weekend, she was allowed to roll up the blankets on her cot in the early hours of today.

Stewart's journey into darkness began with one bad decision in December 2001. It was an instruction to her stockbroker to dump 40,000 shares she held in a bio-tech company founded by a family friend, Sam Waksal, called ImClone. The trouble was Mr Waksal had been given early word that the government was to announce the following day that it would not be licensing a new drug developed by his scientists. The Feds concluded Stewart had been illegally tipped off ahead of time.

When Stewart was charged with securities fraud and deception - she flatly denied any such thing had happened - there was a national outbreak of schadenfreude. It had always been true that the Americans who adored Stewart, watched her shows, read her magazines and bought her wares exclusively offered by Kmart, were matched by those who derided her for her self-righteous primness. Stewart lived the high-life of weekends at the Hamptons, polo-and-champagne parties and holidays on private jets. If there were multitudes who adored her, most of them women, there were as many who envied her.

At her trial in Manhattan, under the glare of the international media, things could hardly have gone more badly. Everything her critics had suspected of her - that she was haughty and for years had trampled over her underlings - seemed to be confirmed in the weeks of embarrassing testimony. Finally, she was found guilty of obstruction of justice.

The stock in her company crashed, advertisers fled her magazines, the cooking and crafts television show she had hosted for years had to be cancelled. Stewart lost her positions as chief executive officer and chairman of the company, which in turn took several steps to distance itself from her.

The fallout for the company has been severe. About 125 jobs have been lost since 2001 and it has suffered a string of quarterly losses. Just two weeks ago, it reported losses of $7.3m for the last quarter of last year. A company that built itself solely upon the image of its founder has faced the ultimate disaster: that figure being dragged through the mud in public.

It was Stewart herself who took the first step towards righting the ship. Shortly after her conviction, she announced that while her lawyers were filing the inevitable appeal she would forgo her right to await its outcome before serving her sentence. That was the moment she declared her desire to go to prison straight away, she said, to be out in time for spring planting. The logic seemed sensible: let's get this thing over with as quickly as possible and try later to get back to normality. Just being in prison, out of the public eye, has arguably been the best remedy for Stewart, and the perception, reinforced at the trial, that she was a diva who considered herself above other mortals.

There is no better way of demonstrating humility than being behind bars for five months, mopping floors and eating prison food. Her early check-in was a "smart move", says Robert Passikoff, the founder and president of Brand Keys, a New York marketing firm that has tracked consumer opinions of the Stewart brand.

He says: "The outcome of her trial wasn't just that she was found guilty but that she was also found to be mean-spirited." Prison has "humanised her, softened her and turned her from a villain into a victim and that's a positive thing". For the first time, Stewart had the chance to turn the envy that many felt for her into something approaching sympathy.

Her life since 8 October last year has hardly been one of hard labour or solitary confinement, of course. With its almost 1,000 inmates and 50 acres of grounds, the Alderson Camp, otherwise nicknamed Camp Cupcake by the tabloid media, does not even have a fence. And Stewart was in a residential "cottage", more comfortable than its main dormitory wing. She shared a room with another inmate and even had privacy in the bathroom, in a shower stall with a curtain. She was given relatively soft maintenance duty, cleaning floors and keeping offices tidy.

It has surely been no mistake that snippets of Stewart's day-to-day prison life have been leaked to a hungry media. Not all of it has been helpful: there were early stories of other inmates complaining of her relatively cushy assignments and bossy manner. One newspaper claimed she had been labelled the "Contraband Queen" for squirrelling away luxury items in her room to which others had no access. And there was some mocking of her determination to make herself private meals in the common room microwave because she considered the cafeteria food inedible.

But over time, those leaks have become far more benign. The campaign of her rehabilitation had obviously begun. We began to hear of her crafts endeavours in prison, including knitting and scrounging old ceramics in a crafts workshop and redecorating them for a Christmas nativity scene.

She helped in a Christmas decorating competition, although, ironically given her mythical reputation for creativity, her team did not win. She reportedly helped organise an eight-week series of seminars for the inmates called Empowerment for Women and kicked them off with a talk on "What's Hot and What's Not" about starting a business.

Word even began to seep out that the other inmates began to love Stewart rather than resent her. Chrisa Gonzalez, who spent seven months at the same facility for distributing marijuana, said they "thought she'd act like she deserved special treatment, but she didn't. My friends at Alderson say she's been very gracious". She said what she had learnt of Stewart's activities in prison had turned her into much more of a fan. "How many people are better off when they get out of prison than when they went in?", she says. "Martha's pretty lucky, but I'm happy for her."

Opinion is divided over whether Stewart should come out of prison waging a campaign for the other inmates or whether she would be better off never mentioning the justice system again. The latter option may be hard to follow, because her case is not yet over. The appeal is pending, with the possibility that if her verdict is overturned a new trial could be ordered. And she still faces a suit filed by the Securities and Exchange Commission from the ImClone debacle.

"The biggest challenge for us is shaking off the past few years," said Susan Lyne, the new CEO of Martha Stewart Living Omnimedia. "Everybody here has been distracted by what we've gone through since 2002, and we're still being asked about it constantly. It still takes an enormous amount of my time to deal with the past, and what we need to be able to do is just reset the company so we can completely focus on future business."

The future for the firm will include welcoming Stewart back on Monday morning with open arms. The company has high hopes, especially, of her television prospects. She will start work on them immediately, even though she faces five months of semi-confinement at her Bedford estate, wearing an electronic anklet and limited to certain hours outside her house for work commitments or indeed anything, including seed-planting or horse-riding. One project is for a five-day-a-week syndicated show on cooking and crafts much like the one she used to preside over.

But the key for Stewart may not be how these programmes fare when they air after the summer, but how she comes across in the next hours and days. She has the chance to turn her prison experience to her favour. "America has got to know she's not the same defiant Martha she was before," says Britt Beemer, founder of the marketing firm, America's Research Group. "That's the challenge. If she can be humble through this, America will forgive her."