SEC to Bring Civil Case Against Martha Stewart

22 October 2002

America’s arbiter of all that is tasteful in food, design and lifestyle, media queen Martha Stewart, is likely to be on the receiving end of a civil lawsuit brought by the Securities and Exchange Commission following its investigation into insider trading at biotechnology company ImClone.

The move places the onus on Stewart and her legal advisors to show why charges should not be brought. And it does not preclude the possibility of criminal charges being filed by the US attorney’s office, currently probing her role in the ImClone affair.

ImClone founder and former ceo Sam Waksal, a close friend of Stewart, last week pleaded guilty to insider trading charges. It is alleged he also tipped-off Stewart to sell her shares the day prior to a public announcement that ImClone's propitious anti-cancer drug Erbitux had been rejected by the Food and Drug Administration.

Whatever the outcome of these investigations, serious damage – possibly irreparable – has been done to Stewart’s reputation for apple pie integrity and good judgement, the cornerstones of her multi-million dollar business empire Martha Stewart Living Omnimedia. Shares in the company have slumped by over 60% since her alleged involvement in ImClonegate broke in June.

Many investors believe she should step down now to salvage what is left of the business and today’s news of the SEC proceedings will increase the pressure for her to quit.

Data sourced from: Financial Times; additional content by WARC staff