| Martha Stewart leaves Manhattan federal court in New York on Wednesday. (AP)
New York, June 5 (Reuters): Martha Stewart, who became one of America’s most successful female entrepreneurs by telling people how to entertain, cook and decorate their homes, was charged yesterday 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 stock sale.
Within hours of pleading innocent to the charges, Stewart resigned her positions as chairman and chief executive of Martha Stewart Living Omnimedia Inc.
The charges, which could carry penalties of up to 10 years in prison, marked a stunning blow to Stewart, who had become a household name while courting a celebrity lifestyle. A former stockbroker and model, Stewart had turned a small catering outfit into a multi-million-dollar media and home-decorating business.
Using skills such as gardening, cooking, baking and sewing learned from her Polish immigrant family, Stewart became an iron-willed perfectionist with an eye for detail and innovation.
But her steely ambition and her sometimes imperious style have been satirised on television and were the central theme of a recent made-for-TV movie Martha Inc: The Martha Stewart Story in which the domestic style setter was played by Cybill Shepherd.
Stewart and Bacanovic, who was a broker with Merrill Lynch, conspired to “fabricate and attempt to deceive investigators with a fictitious explanation for her sale”, the 41-page indictment said. Stewart sold nearly 4,000 shares the day before ImClone delivered bad news that caused its stock to plummet.
“This criminal case is about lying, lying to the FBI, lying to the SEC (Securities and Exchange Commission) and lying to investors. That is conduct that will not be tolerated by anyone,” US attorney James Comey told 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 recognisance.
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 SEC, which filed a civil suit yesterday 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.