They’ve thrown the book at Martha Stewart, the all-American multimillionaire media arbiter of matters wholesome and stylish. In New York Wednesday a federal grand jury indicted Stewart (61) on five criminal counts of securities fraud, conspiracy and making false statements to federal agents.

As the universe knows, Stewart allegedly indulged in insider trading, selling a large block of shares in biotech company ImClone Systems just one day prior to a public announcement that the Food and Drug Administration had refused to license its new anti-cancer drug Erbitex.

Her close friend, ImClone founder and former ceo Samuel Waksal, will be sentenced on June 10 after pleading guilty to bank and securities fraud charges.

Also indicted alongside Stewart was her former stockbroker at Merrill Lynch, Peter Bacanovic (41). Both pleaded not guilty and were released on their own recognizance, although the latter was required to surrender his passport. Bacanovic was also charged with perjury when testifying to the SEC; plus creating and using false documents to cover Stewart's timely ImClone stock disposal.

Following a sixteen-month investigation, prosecutors charge that Stewart’s sale was based on material, nonpublic “insider” information from Bacanovic: specifically that Waksal and one of his relations were trying to sell all the ImClone stock they held.

Coincident with the indictment Stewart resigned the offices of chairman and chief executive at the exploitative empire that bears her name – Martha Stewart Living Omnimedia – and of which she is the largest shareholder.

Stewart's lawyers plan an aggressive defense. They aver the indictment reveals that the foundation of the investigation (that she sold her ImClone shares based on inside information) has proved to be false. “Martha Stewart has done nothing wrong,” they chorus. The refrain to which is that the government has made her “the subject of a criminal test case” because of her celebrity status.

To quote the home page of Stewart’s folksy but tasteful website:

When America wants to learn how to
Make the perfect piecrust,
Grow an [sic] herb garden,
Create a beautiful flower arrangement,
Or fix a broken window,
It turns to Martha Stewart.

There is no advice on how to reverse a bad bet.

Data sourced from: The Wall Street Journal Online; additional content by WARC staff