- The Washington Times - Tuesday, October 22, 2002

NEW YORK (AP) SEC investigators have notified Martha Stewart that they plan to recommend civil securities-fraud charges against her in connection with her sale of ImClone Systems Inc. shares, the Wall Street Journal reported yesterday.
The Securities and Exchange Commission gave Mrs. Stewart what is called a Wells Notice, the Journal reported on its Web site. That offers her a chance to explain her actions before the full commission makes its final decision. In most cases, such a notice leads to filing of charges.
Mrs. Stewart's attorneys referred calls to Allyn Magrino, Mrs. Stewart's spokeswoman, who declined to comment on the development. Martha Stewart Living Omnimedia Inc., where Mrs. Stewart is chief executive and chairman, also declined to comment.
The news, which broke after regular trading, is the latest in a spate of setbacks for Mrs. Stewart, whose position at the helm of the multimedia company appears more uncertain. Mrs. Stewart resigned earlier this month from the board of the New York Stock Exchange.
Shares of Martha Stewart Living Omnimedia, which have been battered since news broke that Mrs. Stewart was linked to the ImClone scandal, were up more than 11 percent, or 75 cents per share, closing at $7.50 yesterday on the New York Stock Exchange. But shares lost more than 14 percent, or $1.10, reaching $6.40 in after-hours trading.
Mrs. Stewart is already under investigation by the Justice Department, which is probing whether she lied to lawmakers about her sale of ImClone shares.
Mrs. Stewart sold her almost 4,000 shares of ImClone on Dec. 27 one day before the Food and Drug Administration announced it had denied the biotech company's application for Erbitux, its promising cancer drug. ImClone's stock subsequently plummeted.
Mrs. Stewart has denied any wrongdoing, maintaining that she and her broker, Peter Bacanovic, formerly of Merrill Lynch, had a standing order to sell the shares if the stock dropped below $60.
At issue is whether Mrs. Stewart acted on illegally obtained information in selling her stock.
Mrs. Stewart is friends with Sam Waksal, founder and former chief executive of ImClone, who pleaded guilty last week to several counts of bank fraud, securities fraud, conspiracy to obstruct justice and perjury.
Waksal did not implicate Mrs. Stewart, and his plea was not part of an agreement to cooperate with prosecutors which is rare in a criminal plea.
Douglas Faneuil, Mr. Bacanovic's assistant, initially supported Mrs. Stewart's and Mr. Bacanovic's account, but later admitted he withheld information when first interviewed by investigators from the SEC and the FBI.

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