Updated from 10:26 a.m. EDT

Martha Stewart Living Omnimedia ( MSO) said it has been informed that the U.S. Attorney's Office for the Southern District of New York has launched a criminal investigation against company founder Martha Stewart.

In a press release Tuesday, the company said the U.S. Attorney's Office plans to request that a grand jury return an indictment against her in the near future. Additionally, Martha Stewart Living has received word that a civil complaint by the Securities and Exchange Commission is also expected.

The company and its board "have been planning for a number of possible contingencies, are evaluating the current situation and will take action as appropriate."

The press release didn't provide any additional details about the investigation, but Martha Stewart was known to have been friends with Sam Waksal, the former CEO of ImClone Systems ( IMCLE), who resigned last year amid an insider trading scandal involving the company's shares.

Stewart sold nearly 4,000 shares of ImClone in December 2001, shortly before the company said the Food and Drug Administration had refused its application for the cancer drug Erbitux.

The Wall Street Journal reported last October that the SEC would recommend filing civil securities fraud charges against Stewart for her controversial sale of ImClone stock.

Stewart has stated that she sold her ImClone shares under an existing stop-loss arrangement. The Journal also reported in October that federal prosecutors were considering filing criminal charges against Stewart for alleged insider trading, as well as obstruction of justice and making false statements about the reason for her sale.

Shares of Martha Stewart were losing $1.92, or 17%, to $9.28 in midday New York Stock Exchange trading.

Charges Seen Soon

The company's statement followed a Financial Times report that an indictment was imminent after a last-ditch appeal to senior Justice Department officials in Washington to intervene in the case.

Stewart's lawyers have been engaged in settlement negotiations with federal prosecutors in New York, but they had delayed their response to a proposed plea agreement while trying to gain access to the main Justice Department office in Washington, according to the report.

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