Document text
Martha Stewart settles charges with hefty fine Tuesday Aug 8, 2006 at 2:00 AM Dec 18, 2010 at 11:41 PM Walter Hamilton Walter Hamilton Los Angeles Times NEW YORK & 8212; Ending her legal battle with the government, Martha Stewart has agreed to settle insider-trading charges by paying $195,000 and accepting a five-year ban on serving as a director of a public company. The agreement, announced Monday, resolves the issue that was at the heart of Stewart's criminal trial but for which she was never prosecuted. Stewart, convicted in 2004 for obstructing an investigation into her sales of ImClone Systems Inc. stock, was not criminally charged with insider trading. "This case sends a strong message that the SEC will not tolerate insider trading, especially where brokers tip their clients with confidential information that company insiders are selling their stock," said Bruce Karpati, assistant director of the SEC's Manhattan office. Stewart neither admitted nor denied wrongdoing, as is common in such settlements. The agreement effectively bars Stewart from serving as chief executive of her namesake media company, Martha Stewart Living Omnimedia Inc., for the next five years. But legal experts said the terms could have been harsher & 8212; for example, she could have been slapped with a lifetime ban on serving as a corporate director. — The SEC case stemmed from Stewart's December 2001 sale of 3,928 shares of ImClone Systems, a small biotechnology company led by Stewart's friend, Samuel D. Waksal. The SEC alleged that Stewart dumped her holdings after her stockbroker, Peter Bacanovic, tipped her that the Food and Drug Administration would reject approval of an anti-cancer drug ImClone had developed. News of the FDA ruling later caused the stock to drop when it was made public. Bacanovic agreed Monday to pay a $75,000 penalty. He was also convicted on obstruction of justice in 2004 for lying to investigators scrutinizing Stewart's ImClone stock trades. In the SEC settlement, Stewart will pay the $45,673 that she would have lost had she not sold her ImClone shares. She also agreed to pay three times that amount, or $137,019, as a penalty, plus $12,389 in interest. The settlement allows both the SEC and Stewart to avoid the risks of a trial. Despite Stewart's criminal conviction, proving insider trading by an active, experienced investor such as Stewart would be difficult, legal experts have said. For Stewart, the settlement ends the prospects of a civil trial and another swirl of negative publicity. "My personal nightmare has come to an end," Stewart said in a statement. In its own statement, Stewart's company said the deal "allows Martha to continue in her role as founder and as the creative force behind the brand." Shares of the company rose 7 cents to $16.95, still far below its 52-week high of $34.74 last Aug. 30.