Martha Stewart settles with SEC - East Valley Tribune: Get Out

Martha Stewart settles with SEC

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Posted: Monday, August 7, 2006 10:45 am | Updated: 2:25 pm, Fri Oct 7, 2011.

WASHINGTON - Homemaking diva Martha Stewart will pay about $195,000 and cannot serve as the director of a public company for five years under a settlement announced Monday on civil insider trading charges with the Securities and Exchange Commission.

Under the settlement, the founder of Martha Stewart Living Omnimedia Inc., a multimedia empire dedicated to stylish living, agreed to pay a total of about $195,000 relating to losses the government said she avoided on her sale of ImClone Systems Inc. stock in December 2001.

In addition to accepting a five-year ban on being a company director, Stewart agreed to limits for five years on her service as an officer or employee of a public company. During that period, she will be prohibited from participating in financial reporting and disclosure, internal controls, audits, SEC filings and monitoring compliance with the federal securities laws.

The terms go into effect on the date the court ratifies the settlement.

Her broker Peter Bacanovic agreed to pay a penalty totaling about $75,000, the SEC said Monday. In a previous order, the SEC barred Bacanovic, a former Merrill Lynch employee, from associating with a broker, dealer or investment adviser.

In settling the charges, Stewart and Bacanovic neither admitted nor denied the allegations in the SEC complaint.

In March 2005, Stewart completed a five-month prison term for lying to federal investigators about why she made the stock sale. She was convicted of the criminal charge in June 2004.

"This case sends a strong message that the commission will not tolerate insider trading, especially where brokers tip their clients with confidential information that insiders of companies are selling their stock," said Bruce Karpati, assistant regional director for the SEC's Northeast Regional Office in New York.

Stewart sold ImClone shares a day before the Food and Drug Administration announced it had declined to review ImClone's application for its cancer drug Erbitux. The stock fell about 16 percent in the wake of that FDA announcement. Her defense was that she had an agreement with her broker to sell ImClone shares when it fell to $60 per share.

Spokesmen for Martha Stewart Living did not immediately return calls for comment Monday.

Stewart's personal legal woes date back to June 2002 when news surfaced of Stewart's questionable sale of ImClone stock.

The SEC had filed the complaint charging Stewart with insider trading the same day she was indicted on June 4, 2003 on criminal charges. But the SEC stayed the complaint, only lifting it in April after criminal appeals were exhausted.

Initially, Stewart sought to fight the SEC charges, filing an 11-page response to the SEC complaint in May, defending that she "acted in good faith."

In settling the case with the SEC, Stewart avoids yet another public trial, which some analysts say could have stalled a turnaround that the company has made over the last year. Many analysts have maintained that it was in Stewart's interest to settle the charges since she will still be able to wield considerable influence over her media empire.

Martha Stewart Living shares rose 18 cents to $17.06 in afternoon trading on the New York Stock Exchange.

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