Martha Stewart, one of America’s most prominent businesswomen, yesterday faced criminal charges including obstruction of justice and securities fraud, in a case that has gripped the US public.
Ms Stewart, who has built an empire on the back of her recipe for tasteful living, arrived at a downtown Manhattan court dressed in a smart white raincoat and matching umbrella. Her reputation and business by contrast appeared to be in tatters. She could face up to 10 years in jail on the securities fraud charge alone.
The charges stem from the sale of shares in a drug company, Imclone, in December 2001. Stewart, a friend of the company’s founder Sam Waksal, sold the shares a day before the firm announced that it had suffered a crucial setback in the development of a potentially blockbusting cancer drug. The announcement, predictably, caused ImClone’s share price to plummet.
Waksal, who allegedly tipped off members of his family and tried to sell some of his own shares, has already pleaded guilty to several counts of securities fraud and will be sentenced next week.
Although she has not been charged with insider dealing, Stewart has been accused of lying to investigators during two separate interviews. The securities fraud charges are for allegedly making false statements to shareholders in her own company. She pleaded not guilty to all charges.
Prosecutors have been accused of using the celebrity of Stewart to send a warning that they are taking seriously the financial scandals that rattled America last year. The shares sold by Stewart were worth a relatively modest $225 000.
Ms Stewart (61), seized on that sentiment yesterday. In a stiff rebuttal of the claims, her lawyers asked if the justice department was attempting to deflect public attention from its failure to bring charges against senior executives of the firms involved in the most calamitous scandals of last year: Enron and WorldCom.
They also suggested it was a cynical attempt to bring down a woman who succeeded in a male dominated business world. ”Martha Stewart has done nothing wrong,” they said.
US attorney James Comey denied the claims. He said ”Martha Stewart is not being prosecuted because of who she is but because of what she did. This case is about lying. It’s about lying to the FBI, lying to the securities and exchange commission, lying to investors.”
Stewart built her business empire in her own image. Martha Stewart Living Omnimedia, listed on the New York Stock Exchange, publishes magazines, produces TV cookery, home design and gardening programmes featuring Stewart, and makes a line of everyday home products from towels to frying pans.
But the close relationship between her image and the company has sparked severe doubts that it can survive the scandal that has been swirling for the past year. Shares in her company have tumbled and millions of dollars have been wiped from her fortune. She is expected to step down as chairman and chief executive.
The 41-page indictment charges Stewart with securities fraud, obstruction of justice, conspiracy and making false statements.
She also faces civil insider dealing charges from the SEC, the US financial regulator, which seek to bar her from working for a public company.
Stewart, a former stockbroker and director of the New York Stock Exchange has maintained her innocence throughout the investigation. She claims she had a standing order with her stockbroker to sell her shares in ImClone if they fell below $60.
At the company’s annual shareholders meeting on Tuesday, a visibly upset Stewart said in a pre-recorded message that she was ”grievously sorry” for the controversy. – Guardian Unlimited Â