- The Washington Times - Friday, October 4, 2002

NEW YORK (AP) Martha Stewart resigned from the board of the New York Stock Exchange yesterday, one day after federal prosecutors secured a key witness in their investigation of the decorating diva's involvement in the ImClone Systems Inc. insider-trading scandal.

Mrs. Stewart sent a letter of resignation to NYSE Chairman and Chief Executive Richard Grasso before the exchange's board meeting.

"I did not want the media attention currently surrounding me to distract from the important work of the NYSE and thus felt it was appropriate to resign," she said in a statement later yesterday.

Mr. Grasso said the board would "miss Ms. Stewart's counsel and insight," and called her decision "voluntary."

An assistant to Peter Bacanovic, Mrs. Stewart's broker at Merrill Lynch, pleaded guilty Wednesday to a misdemeanor charge of taking a payoff to keep quiet about her sale of 4,000 shares of ImClone. As part of his plea, Douglas Faneuil agreed to testify against Mrs. Stewart and others who might be charged in connection with the stock scandal.

Congressional investigators have asked the Justice Department to begin a criminal investigation into whether Mrs. Stewart lied to lawmakers about her stock sale.

"Given the allegations floating around about Stewart, it becomes problematic and more difficult for her to sit on the board of the New York Stock Exchange," said Charles Elson, director of the Center for Corporate Governance at the University of Delaware. "When you sit on the board of the exchange, you are responsible for holding up the standards of the exchange."

Mrs. Stewart dumped her shares in December, a day before the stock began to plummet on news that the Food and Drug Administration would not review ImClone's application for its highly anticipated cancer drug, Erbitux. The FDA decision meant Erbitux's approval would be delayed significantly, and the company's fortunes relied on the drug.

Mrs. Stewart, who has denied any wrongdoing, said she had a standing order to sell the ImClone shares if they fell below $60.

Shares of Martha Stewart Living Omnimedia Inc. have fallen more than 65 percent since her connection to the ImClone trading scandal was reported in early June.

Yesterday's announcement helped push the shares down even further, and they fell 59 cents, nearly 9 percent, to $6.21 on the NYSE.

Mrs. Stewart, one of 27 members of the NYSE's board of directors, joined in June. Her term was set to expire in 2003.

In other corporate scandal news yesterday:

•Former Global Crossing Ltd. employees, who say they lost $250 million as the bankrupt company's shares plunged, said Chairman Gary Winnick's $25 million pledge to compensate retirement funds was nowhere near enough.

"He's off by an order of 10," said Paul Laukaitis, a 16-year veteran of Global Crossing and a predecessor telephone company. Mr. Laukaitis, 45, said his retirement plan lost $100,000 in Global Crossing stock by January, when the network operator declared bankruptcy. The company had 5,000 employees in May, down from 13,500 in January 2001.

•The U.S. government's top securities watchdog, New York state's attorney general and other regulators pledged to work together to stem abuses and conflicts of interest at big Wall Street firms.

Harvey Pitt, chairman of the Securities and Exchange Commission, and Eliot Spitzer, the New York attorney general, said they planned to create a common plan in the next few weeks to investigate and punish abuses by investment firms such as conflicts of interest among analysts and unfair distribution of hot new stocks by the firms.

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