Martha Stewart Indicted For Fraud

This week on Martha Stewart’s Topless Christmas…
Source: CNN.com

Martha indicted

NEW YORK (CNN/Money) - Martha Stewart, who built a media and entertainment empire around her homemaking image, was indicted Wednesday on charges related to her sale of ImClone Systems stock.

Martha Stewart arrives at federal court in New York.
A federal grand jury in New York handed up a nine-count indictment that included charges of securities fraud and obstruction of justice and also named Stewart’s former broker at Merrill Lynch, Peter Bacanovic.

Stewart, 61, entered federal court in Manhattan where she surrendered to federal authorities ahead of the formal accusations.

Stewart’s troubles began a year ago this month when it was revealed she sold ImClone shares a day before a regulatory setback sent the stock tumbling. Investigators have been trying to determine if Stewart, who knew ImClone’s CEO, had illegal inside information ahead of a sale that netted her about $229,000.

Wednesday’s indictment appeared to sidestep that question, focusing instead on her statements and dealings with investigators over the past year.

Stewart was charged with two counts of making false statements, while one false-statement charge was made against Bacanovic. Each faces one count of obstruction of justice, and Bacanovic was charged with perjury and making and using false documents.

The lone charge of securities fraud was leveled against Stewart.

“Martha Stewart has done nothing wrong,” her lawyers Robert Morvillo and John Tigue said in a statement. “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.”

In a separate but related case, the Securities and Exchange Commission has filed civil charges against Stewart, seeking to bar her from being an officer or a director of a public company, a person familiar with the action said.

Stewart became one of the nation’s wealthiest people by taking Martha Stewart Living Omnimedia Inc. public in October 1999 during the last gasp of the 1990s bull market. But the company whose identity is so tied to Stewart’s became unprofitable this year and has lost millions in market value as costumers defected and legal fees climbed.

Shares of Martha Stewart Living Omnimedia (MSO: up $0.46 to $9.98, Research, Estimates) edged higher Wednesday but are off sharply since her problems arose.

Through Bacanovic, Stewart sold nearly 4,000 ImClone shares on Dec. 27, 2001. A day later ImClone (IMCLE: down $0.03 to $33.52, Research, Estimates), a New York-based biotechnology company, said the Food and Drug Administration rejected its application for Erbitux, sending ImClone shares tumbling.

Wednesday’s indictment raised questions about whether Stewart will resign as CEO and chairman of Martha Stewart Living. It also could bring a plea deal between Stewart and prosecutors, thereby avoiding a trial that would draw tremendous publicity.