America's domestic goddess Martha Stewart struggles to fend off insider trading allegations
Thursday 20 June 2002
Martha Stewart, America's domestic guru, is struggling to fend off allegations that she is part of the latest scandal to rock Wall Street, involving the collapse of a biotechnology firm called ImClone and the arrest last week of its founder.
Ms Stewart is one focus of an investigation by the United States Congress into ImClone's difficulties.
Sam Waksal, the firm's former chief executive, is now awaiting trial on insider trading charges. He allegedly tried to sell shares in his company after learning that the Government would not review an application for approval for a cancer drug developed by the firm.
Moreover, Mr Waksal is alleged to have tipped off family members on 27 December to do the same. The negative announcement from the Food and Drug Administration was due the next day. Several family members did sell. On that day also, Ms Stewart, who is an old friend of Mr Waksal, sold nearly 4,000 shares ImClone.
Responding to speculation that she had acted on inside information, Ms Stewart issued a statement that said her sale had been "entirely proper and lawful". Her lawyers insist she had prior arrangements with her broker to sell if the share price dropped below a certain level.
"The stock price had dropped substantially, to below $60. Since the stock had fallen below $60, I sold my shares, as I had previously agreed to do with my broker," Ms Stewart said in the statement.
The attention given to Ms Stewart's role in the scandal has already battered the fortunes of her own company, Martha Stewart Living Omnimedia. The firm's shares have plunged more than 20 per cent over the past week, as investors learnt of the allegations.
The ruckus hardly matches Ms Stewart's wholesome image. She has her own television show, publishes a monthly magazine and gives her name to countless household products in licensing deals. For years, she has been the unrivalled queen of the American ideal home, giving tips on everything from the perfect pie crust to pleating your curtains.
Ms Stewart has been co- operating with Congressional aides, providing brokerage and phone records.
But some on Capitol Hill are concerned about the precise timing of her instruction to her broker to sell and whether it was made with the help of tips from Mr Waksal.
They note that she telephoned her broker on 27 December and that he was also broker to Mr Waksal.
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