Wednesday, June 4, 2003

Martha Stewart faces possible charges; Stewart to plead innocent if indicted

Enquirer wire services

NEW YORK - Federal prosecutors are close to hitting Martha Stewart with criminal charges in the insider-trading scandal that has been hanging over her head for the past year.

Martha Stewart Living Omnimedia, Stewart's media company, disclosed hours before its annual meeting Tuesday that federal prosecutors in New York are seeking a grand jury indictment of Stewart "in the near future." Shares of her media company plunged on the news that the scandal could bring down Stewart, the embodiment of the brand.

The company also said federal securities regulators - who have already notified Stewart they intend to file civil charges against her - likely will file their own complaint soon. A civil complaint from the Securities and Exchange Commission could eventually cost Stewart hefty fines and her position as CEO of the media company.

Her lawyer said Tuesday that Stewart would fight any charges.

Analysts have speculated that Stewart could be charged with insider trading or obstruction of justice.

It is unclear whether Stewart will continue in her roles at the company, where she is also the biggest shareholder. The company and its board "have been planning for a number of possible contingencies, are evaluating the current situation and will take action as appropriate," the company's statement said.

Spokesmen for both Manhattan U.S. Attorney James Comey and the Securities and Exchange Commission declined comment.

The home-decorating mogul, who built a fortune as a symbol of gracious living and impeccable taste, has been under investigation for selling 4,000 shares of biotechnology company ImClone Systems in December 2001, just before the stock plunged on disappointing news about a Food and Drug Administration decision on an ImClone cancer drug.

Investigators want to know if Stewart had inside knowledge of the impending FDA decision. She is friends with ImClone founder Samuel Waksal.

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

Stewart's chief attorney, Robert Morvillo, issued a brief statement Tuesday: "If Martha Stewart is indicted, she intends to declare her innocence and proceed to trial."

Stewart did not attend her company's annual shareholders meeting, which was held Tuesday in Manhattan and closed to the press. In a brief video, she apologized for not attending but did not address the investigation.

Martha Stewart Living Omnimedia stock fell sharply on the news, dropping $1.68 - or 15 percent - to close at $9.52 on the New York Stock Exchange.

The stock has plunged from just over $19 in June 2002 since news broke of her sale of ImClone stock. It hit a low of $5.26 in October, when she resigned from the NYSE board of directors and an assistant to her stockbroker agreed to cooperate with prosecutors.

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