Martha Stewart: Free at Last

Homemaking maven settles civil suit stemming from charges of insider trading, agreeing to pay $195,000 and refrain from serving as director of a public company for five years

By Gina Serpe Aug 07, 2006 8:35 PMTags

Martha Stewart is tidying up her legal docket.

The homemaking maven has settled a civil suit brought by the Securities and Exchanges Commission over charges of insider trading stemming from her 2001 dumping of ImClone Systems stock.

Per the agreement, Stewart will fork over $195,000 in fines and penalties to the SEC, and will be prohibited from serving as director or CEO of any public company for the next five years. Although she agreed to the penalties, the lifestyle guru neither admitted to nor denied any wrongdoing.

Not that that bothers the SEC.

"This settlement achieves everything we sought to accomplish in pursuing this case," Mark K. Schonfeld, director of the SEC's northeast regional office, told the Wall Street Journal. "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."

In addition, Stewart's former broker, Peter Bacanovic, also settled up with the SEC. He will pay $645 in disgorgement fee as well as a civil penalty of $75,000. He has already been barred from returning to work as a broker.

While Stewart can no longer run her Martha Stewart Omnimedia empire--she long ago stepped down as both a member of the board of directors and as CEO--she has kept up an active role in its day-to-day operations under the title of founding editorial director.

Stewart and Bancovic convicted in March 2004 on criminal charges of conspiring to lie about the reasons behind her massive stock sale, obstruction of justice in the SEC's investigation of the trade, and various other charges stemming from the ill-fated deal.

Stewart served a five-month sentence at Camp Cupcake and another five months under house arrest at her Connecticut estate.

A settlement in the civil suit was long coming; proceedings were postponed while Stewart served out her time on the criminal charges. The stay on the suit was lifted this spring, at which point Stewart announced she would not be fighting the charges and that she had begun negotiating a resolution.

Legal trouble first started brewing for Stewart when she sold off 4,000 shares of ImClone stocks in December 2001, just one day before the biotech company went public with news that its prized cancer drug was getting a thumbs-down from federal officials.

Stewart has maintained--for the past five years--that she traded her stocks based on information that was neither illegal nor inside. The SEC disagreed, claiming Bacanovic fed her an inside tip.

Now that her legal mess is finally behind her, Stewart can refocus on her TV career. Her syndicated talk show, Martha, has been renewed for a second season, kicking off this fall.