Martha Stewart's Rough Trade

This is the story of how Martha Stewart saved $50,000 and lost $166 million trading stocks.

Earlier this month, Sam Waksal, the former chief executive officer of biotech company ImClone (IMCL Quote), was arrested in his Soho loft and charged with insider trading. On Dec. 27, 2001, it is alleged, Waksal got wind that the Food and Drug Administration would on the next day announce its rejection of ImClone's application for its anticancer drug Erbutix. Waksal is charged with giving a heads-up to family members and other associates, who then proceeded to dump hundreds of thousands of shares on Dec. 27 and Dec. 28, saving millions of dollars when the stock fell nearly 20% on Dec. 31.

How does the domestic doyenne figure in all this? On Dec. 27, Stewart, whose daughter once dated Sam Waksal, sold her entire 3,928-share Imclone position at $58 per share. By selling ahead of the bad news, Stewart saved $49,532. ...