UPDATE: Martha Stewart Quits

Conviction of Martha Stewart Forum

Martha Stewart faces possible criminal charges, her company said Tuesday, in an insider trading scandal that has tainted her image as symbol of tasteful living.

Stewart's lawyers have told the company that she is the target of a criminal investigation by the U.S. attorney in Manhattan, which "intends to request the grand jury to return an indictment against her in the near future."

The statement, issued by Martha Stewart Living Omnimedia Inc., did not elaborate on the possible charges. Analysts have said charges could range from insider trading to obstruction of justice.

A civil complaint by the Securities and Exchange Commission also is expected, according to the company's statement. The SEC had notified Stewart in October of its intent to file a civil complaint that could cost Stewart heavy fines and her job as CEO of her company.

Stewart has been under investigation for selling shares of biotechnology company ImClone Systems Inc. in December 2001 - just before disappointing news surfaced about a key ImClone-produced drug.

Stewart, 61, denied any wrongdoing in the ImClone sale. She claimed to have had an arrangement with her broker for the automatic sale of the stock when it dropped to a certain price.

Her personal attorney did not immediately return a call for comment Tuesday, and her public-relations firm said it did not have any immediate comment.

Shares of Martha Stewart Living Omnimedia fell $1.66, or 14.8 percent, to $9.54 in midmorning trading Tuesday on the New York Stock Exchange.

MSO shares have plunged since their peak of $23.15 in July 2001, reaching a low of $5.26 a share in early October shortly after Stewart resigned from the New York Stock Exchange's board of directors and after an assistant to her stockbroker agreed to help prosecutors investigating Stewart's sale of ImClone stock.

Marvin Smilon, a spokesman for Manhattan U.S. Attorney James Comey, declined comment.

In its statement, Martha Stewart Living said its directors "have been planning for a number of possible contingencies, are evaluating the current situation and will take action as appropriate."

Stewart is the company's chairman and chief executive. Through television shows and public appearances, she is also the embodiment of its brand, with almost all products bearing her name. In an apparent effort to a reduce that dependency, the company recently launched a magazine, Everyday Food, that did not carry her name.

The scandals had affected earnings at the company, which have been slumping. Revenue in the first quarter of the year dropped 15 percent from the same period a year earlier.

Stewart told the New Yorker for an article published in January that she estimates she has lost $400 million due to the decline in value of her more than 30 million shares in her multimedia company, along with legal fees and lost business opportunities.

ImClone founder Samuel Waksal, a friend of Stewart, is to be sentenced next week after pleading guilty in the ImClone insider-trading scandal. He could be sentenced to six to seven years in prison, plus fines - although his defense team is seeking a lighter term.

Waksal has admitted he tipped off his daughter Aliza Waksal to sell ImClone stock before it plummeted on the bad news. But he has not implicated Stewart, and his plea was not part of an agreement to cooperate with prosecutors.

Stewart sold nearly 4,000 shares of ImClone on Dec. 27, 2001 - one day before the Food and Drug Administration announced it would not review ImClone's application for approval of Erbitux, which the company had touted as a promising cancer drug. ImClone's stock subsequently plunged.

Federal authorities want to know whether Stewart sold ImClone shares because she had insider knowledge of the impending FDA decision.

Stewart has denied any insider dealing. She has maintained that she had a standing order with her Merrill Lynch broker, Peter Bacanovic, to sell the shares if the stock fell below $60.

Just this week, doctors concluded Erbitux, the ImClone cancer drug, worked just as well as an earlier company-sponsored study said it did. ImClone stock rose sharply on the news.

Source: W. Post

Martha Stewart could be arrested as early as Wednesday on obstruction of justice charges and is then expected to step down as chairman and chief executive of the media and design company she built, Martha Stewart Living Omnimedia Inc. , CNBC said.

Stewart is the subject of a federal criminal probe arising from her sale of shares of ImClone Systems Inc. shortly before the biotechnology company's experimental cancer drug was rejected by U.S. drug regulators.

Citing unnamed sources familiar with the matter, CNBC reported that federal prosecutors are "highly likely" to obtain a criminal indictment on obstruction of justice charges as early as Wednesday.

In conjunction with that, Stewart is expected to be arrested and she will likely resign her positions as CEO and head of her company's board of directors, CNBC said.

Company President Sharon Patrick is expected to serve as acting CEO, CNBC said.

Stewart's attorney, Robert Morvillo, was not immediately available to comment on the CNBC report, but earlier said Stewart would take her case to trial if she is indicted.

Stewart is expected to remain on the board and to advise the company on creative matters, CNBC said. She would also remain its controlling shareholder with more than a 60 percent stake.

Earlier on Tuesday, Martha Stewart Living said it had been informed that prosecutors were likely seek a criminal indictment of Stewart.

Martha Stewart shares were down $2.12, or nearly 19 percent, at $9.08 on the New York Stock Exchange, where they were the day's biggest loser.

Source: Reuters

It was also stated today that if she is indicted that she will plead not guilty....

Oh what a shocker that is!! LOL

Hmmm....this will be interesting. I imagine she will get out of it by her "star" status like they all do.

New news!


Stewart Charged with Securities Fraud
27 minutes ago

By Michele Gershberg and Paul Thomasch

NEW YORK (Reuters) - Martha Stewart (news - web sites), who turned a small catering outfit into a multimillion-dollar media and home-decorating business, was charged on Wednesday with lying to federal authorities investigating her sale of stock in a biotech company run by a friend.
In a nine-count criminal indictment, the government charged that Stewart and her former stockbroker, Peter Bacanovic, interfered with the investigation into the suspicious timing of her ImClone Systems Inc. (Nasdaq:IMCLE - news) stock sale. Stewart, a one-time model and stockbroker, sold nearly 4,000 shares the day before ImClone delivered bad news that caused its stock to plummet.


Stewart and Bacanovic, who was a broker with Merrill Lynch & Co., conspired to "fabricate and attempt to deceive investigators with a fictitious explanation for her sale," the 41-page indictment said.


"This criminal case is about lying, lying to the FBI (news - web sites), lying to the SEC and lying to investors. That is conduct that will not be tolerated by anyone," U.S. Attorney James Comey said at a news conference.


Stewart was also charged with securities fraud and making false statements, and during her arraignment she entered a not guilty plea on all counts. She was released on her own recognizance.


Countering criticism that prosecutors have pursued the case because of Stewart's celebrity, Comey repeatedly said during the news conference that the charges had nothing to do with the fame and wealth that Stewart received from her dazzling recipes and home decorating tips, TV appearances and magazines.


"Martha Stewart is being prosecuted not because of who she is, but what she did," he said, describing the case as "something of a tragedy."


Surprising some legal experts, prosecutors did not bring criminal insider-trading charges against Stewart even after more than a year of investigating her sale of ImClone shares.


Instead, prosecutors left those allegations to the U.S. Securities and Exchange Commission (news - web sites), which filed a civil suit on Wednesday charging that Stewart "committed illegal insider trading ... after receiving an unlawful tip from Bacanovic."


The SEC suit also charged both Stewart and Bacanovic with making false statements.


Bacanovic was additionally charged with perjury for allegedly lying to SEC investigators. Bacanovic was also the broker for Sam Waksal, a close friend of Stewart's and at the time chief executive of ImClone, which was trying to bring an experimental cancer drug to market.


The charges, which could carry penalties of up to 10 years in prison, marked a stunning blow to Stewart, who built a catering business into a media and design company spanning magazines, television and merchandise, and became a household name while courting a celebrity lifestyle.


"My personal opinion has always been that they have treated this case more seriously because it is Martha Stewart, in part because she has always put her reputation on the line as part of her professional status," said Jill Fisch, a law professor at Fordham University.


Following the indictment, Stewart is expected to step down as chairman and chief executive of her company. Shares of her company, Martha Stewart Living Omnimedia Inc. (NYSE:MSO - news), rose 5 percent on Wednesday.


Stewart, 61, wearing a light brown suit and appearing prim and composed, entered her not guilty plea before U.S. District Judge Miriam Goldman Cedarbaum just after 3:00 p.m. EDT. Stewart had arrived at the courthouse three hours earlier, sweeping through a crowd of rain-soaked reporters, photographers and television crews.


Asked by Judge Cedarbaum whether she planned to plead not guilty on all counts, Stewart answered in front of a packed courtroom, "I do indeed." Bacanovic also pleaded not guilty.


Stewart left the courthouse without making any further statements, but earlier her attorneys Robert Morvillo and John Tigue issued a statement saying she was innocent.


"Martha Stewart has done nothing wrong," a statement from the lawyers said. "The government is making her the subject of a criminal test case designed to further expand the already unrecognizable boundaries of the federal securities laws."

The latest developments in the 16-month-long ordeal came after settlement talks failed to produce a plea agreement acceptable to her and prosecutors, reports said.

Securities fraud carries a penalty of up to 10 years in prison, and obstruction of justice carries a penalty up to five years in prison and up to a $250,000 fine.

The SEC, in its civil suit, seeks to bar Stewart from being a company director and to limit her activity as an officer of a public company.

Stewart has repeatedly said her sale of 3,928 ImClone shares was triggered by a standing order to sell if the stock fell below $60. She sold the stock for $58 per share on Dec. 27, 2001. The next day, ImClone reported that federal health regulators had rejected its drug application, triggering a selloff in the stock.

Waksal was removed as head of ImClone a year ago, and last fall he was indicted on insider trading charges for trying to sell his own stock days before the drug's rejection was reported. He pleaded guilty to six of the 13 counts and will be sentenced next week.

Martha Stewart quits in wake of criminal charges

Martha Stewart, the home design guru revered by millions of Americans, on Wednesday stepped down as chairman and chief executive of her company following her indictment earlier in the day by a federal grand jury on criminal charges that she tried to cover up a stock sale in biotechnology company ImClone. Peter Bacanovic, Ms Stewart's Merrill Lynch stockbroker, was also indicted over the scandal. Both pleaded not guilty.

The indictment makes Ms Stewart the most recognisable corporate chief to face criminal charges in the current crackdown on white-collar crime. It threatens to destroy her reputation and the media and merchandising empire she built.

Critically, Ms Stewart, who will stay on the board of her company, Martha Stewart Living Omnimedia, was not charged with criminal insider trading violations - the original reason for the launching of the government's probe.

The indictment threatens to destroy her reputation and her media and merchandising empire. Sharon Patrick, the current president, has taken over as chief executive and Jeffery Ubben, a director, as chairman.

For more than a year, authorities have been probing whether Ms Stewart benefited from inside information when she sold holdings in ImClone the day before regulators delayed approval of its promising cancer treatment and sent its shares plunging.

The nine-count indictment included charges of securities fraud, making false statements to investigators, and obstructing justice.

The fraud charges stem from Ms Stewart's public explanation of her innocence after the scandal broke. Authorities said it was a lie to protect the share price of her company. The charge carries a possible 10-year jail sentence. Obstruction of justice and making false statements could carry five years each.

Mr Bacanovic was charged with obstruction of justice and perjury.The government claimed he lied to investigators and doctored his notes in an effort to help Ms Stewart hide facts surrounding the share sale.

The Securities and Exchange Commission brought a related case yesterday accusing Ms Stewart of civil insider trading, which carries less weight than a criminal charge.

Ms Stewart's lawyers said: "The indictment reveals that the predicate for the entire investigation - the accusation that Martha Stewart sold her ImClone shares based on inside information - has proven to be false. It is most ironic that Ms Stewart faces criminal charges for obstructing an investigation which established her innocence."

Shares in Martha Stewart's Living Omnimedia recovered a little ground in New York on Wednesday despite the court appearance, closing up 5 per cent at $10, but still at about half their value a year ago. ImClone shares finished higher again on the Nasdaq market, closing up more than 2 per cent at $34.32.

Source: Financial Times

Martha Talks (http://www.marthatalks.com/)

To My Friends and Loyal Supporters,

After more than a year, the government has decided to bring charges against me for matters that are personal and entirely unrelated to the business of Martha Stewart Living Omnimedia. I want you to know that I am innocent -
and that I will fight to clear my name.

I simply returned a call from my stockbroker. Based in large part on prior discussions with my broker about price, I authorized a sale of my remaining shares in a biotech company called ImClone. I later denied any wrongdoing in public statements and in voluntary interviews with prosecutors. The government's attempt to criminalize these actions makes no sense to me.

I am confident I will be exonerated of these baseless charges, but a trial unfortunately won't take place for months. I want to thank you for your extraordinary support during the past year - I appreciate it more than you will ever know.

For more information, please visit the special website I have established for you at www.marthatalks.com. I will do my best to post current information about the case, and you will be able to contact me there at martha@marthatalks.com. I look forward to hearing from you.

Sincerely,

Martha Stewart