- The Washington Times - Monday, August 7, 2006


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 yesterday 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 make a payment relating to losses the government said she avoided on her sale of ImClone Systems Inc. stock in December 2001.

Stewart agreed to pay $45,673, the amount of losses she avoided from her insider trading, plus $12,389 in interest. But the bulk of the payment comes from the maximum civil penalty of $137,019 — three times the amount of losses she avoided by the sale.

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 yesterday. 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 charges in the SEC complaint.

“This brings closure to a personal matter, and my personal nightmare has come to an end,” Stewart said.

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.

Elizabeth Estroff, spokeswoman at Martha Stewart Living, said yesterday that the company “is very happy that the SEC action has been resolved.”

“The settlement allows Martha to continue in her role as founder and as the creative force behind the brand,” Ms. Estroff continued. “With her strategic vision in design and style as well as in expanding our business opportunities, she is a tremendous asset to this company.”

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