Stewart Settles SEC Case
The Martha Stewart legal saga is finally over.
The founder of
Martha Stewart Living
(MSO)
reached an agreement with securities regulators over allegations of improper trading. The case sent Stewart and her former
Merrill Lynch
(MER)
broker to federal prison nearly two years ago.
The
Securities and Exchange Commission
said Monday that Stewart agreed to pay a penalty of $195,000 in settling allegations that the domestic diva engaged in improper insider trading of shares of
ImClone Systems
(IMCL)
in December 2001. She also cannot serve as an officer of a public company for five years.
Peter Bacanovic, her former broker, will pay a penalty of $75,000. He is barred from working with a brokerage or investment adviser for five years.
The civil settlements with the SEC are the final chapter in the long-running legal drama that gave Stewart a black eye and forced her to step down as CEO of her Martha Stewart Living media empire.
"This settlement achieves everything we sought to accomplish in pursuing this case," says SEC Northeast Regional Director Mark Schonfeld. "The combination of monetary relief and future professional restrictions serve both to sanction the defendants' insider trading and to restrict them from future positions of investor trust."
Stewart and Bacanovic were convicted in early 2004 of conspiracy, making false statements and obstruction of justice. Each received five-month prison sentences and a period of home detention.
Stewart opted to begin serving her sentence while appealing the conviction. Earlier this year, a federal appeals court affirmed the convictions of Stewart and Bacanovic.
Federal prosecutors never charged Stewart and Bacanovic with illegal insider trading.
The case against Stewart stemmed from her well-timed sale of 3,928 shares of ImClone, just before the company announced that the
Food and Drug Administration
wouldn't clear its application for the cancer drug Erbitux. Authorities allege that Stewart sold the shares after being tipped by Bacanovic that ImClone's then-CEO, Samuel Waksal, was selling his own shares. At the time, Waksal and Stewart were close friends. The SEC alleges that Stewart avoided losses of $45,673 by selling when she did.
Waksal, who had sold ImClone stock right before the FDA announcement, was sentenced to seven years in prison for insider trading.
In midday trading, shares of Martha Stewart Living rose 9 cents to $16.97.









