Print

Mail

wiki links

Martha Stewart quits after indictment

PHOTO: AP

Martha Stewart, a TV celebrity who built her fortune on giving advice on cooking and home decoration, was indicted in an insider-trading scandal that could put her behind bars.

Federal prosecutors accused Stewart of dumping her stock in a biotechnology company in 2001 based on illegal privileged information, then covering her tracks and lying to investigators and shareholders.

The homemaking guru, who was a billionaire during the 1990s, saved US$45,000 from the sale, according to the government.

Her stockbroker was also indicted, and the Securities and Exchange Commission (SEC) filed a lawsuit leveling similar charges.

"This criminal case is about lying -- lying to the FBI, lying to the SEC and investors," US Attorney James Comey said. "That is conduct that will not be tolerated. Martha Stewart is being prosecuted not because of who she is, but what she did."

The indictment charges Stewart with securities fraud, conspiracy, obstruction of justice and making false statements. If convicted of all counts, she could face up to 30 years in prison and US$2 million in fines, although the penalty would likely be far lighter under federal sentencing guidelines.

"Not guilty." -- Martha Stewart

In court Wednesday, the 61-year-old Stewart pleaded innocent. Stone-faced and speaking deliberately, she told a federal judge: "Not guilty."

Hours after she pleaded innocent in federal court, she stepped down as chairman and chief executive officer of her media empire.

Her company, Martha Stewart Living Omnimedia, has suffered in the year since the scandal broke, and some analysts say advertisers may pull back even more, stores will stop striking new relationships with the company, and customers may turn away.

The company's revenue the first quarter of the year dropped 15 percent from the same period a year earlier. The company's stock has fallen from US$19 to just over US$10.

A statement from Martha Stewart Living Omnimedia Inc said Stewart would remain on the company's board.

The indictment resulted from an investigation into Stewart's sale of nearly 4,000 shares of ImClone Systems Inc on Dec. 27, 2001 -- the day before an unfavorable Food and Drug Administration decision on ImClone's cancer drug Erbitux sent its stock tumbling.

Stewart has denied she was tipped off.

A former stockbroker who allegedly fed insider information to Stewart through an assistant was charged with perjury and obstruction of justice. He pleaded innocent during the same hearing as Stewart.

The charges carry up to 25 years in prison and US$1.25 million in fines.

The indictment says Stewart unloaded her ImClone stock on inside knowledge that the family of ImClone founder Samuel Waksal, a friend of Stewart's, was planning to sell its shares ahead of the government news.

ImClone's stock plunged after the FDA announced it would not review the company's application for approval of the once-promising drug.

Waksal has admitted he tipped off his daughter to sell ImClone stock before it plummeted. But he has not implicated Stewart.

Waksal pleaded guilty in the scandal and will be sentenced next week. He could get six to seven years in prison, plus fines.

Martha Stewart Living Omnimedia reported sales of US$295 million last year.

The company produces Martha Stewart Living and Martha Stewart Weddings magazines, a newspaper column, a TV show and the Martha Stewart Everyday line of home products, like towels and sheets.
This story has been viewed 1962 times.