A Florida stockholder in Martha Stewart Living Omnimedia Inc filed a class action suit against chief executive Martha Stewart on Friday, blaming her for the recent drop in the company's share price.
Conrad Hahn brought the action in Manhattan Supreme Court, accusing Stewart personally of "breach of her fiduciary duty."
PHOTO: AP
In the 13-page complaint, Hahn alleged that he suffered damages of at least US$75,000 as a result of Stewart becoming embroiled in an insider trading scandal.
She was reported to have sold shares of drugmaker ImClone Systems Inc just before regulators dealt the company a setback by refusing to review its cancer drug Erbitux. Sam Waksal, ImClone's former chairman and a close friend of Stewart, was arrested on insider trading charges on June 12.
MSO posted higher quarterly profits boosted by its flagship magazine last week, but acknowledged that the insider trading probe into Stewart could hit future earnings.
Hahn said in his complaint that Stewart had put "her own personal gain and self-interest above those of her shareholders."
He cited the MSO 1999 prospectus as saying, "Our business would be adversely affected if Martha Stewart's image or reputation were to be tarnished. Our continued success and the value of our brand name therefore depends, to a large degree on the reputation of Martha Stewart."
Hahn said "Martha Stewart's name and reputation and associated goodwill [are] the primary asset of MSO."
MSO shares have dropped more than 50 percent since the start of the second quarter.
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