- NEW YORK (Reuters)
- The enforcement unit of the Securities and Exchange Commission plans
to recommend filing securities fraud charges against Martha Stewart over
her sale of ImClone Systems Inc. stock, a source told Reuters on Monday.
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- If convicted, Stewart would face a hefty fine, and could
be forced out as chairman and chief executive of Martha Stewart Living
Omnimedia Inc. , since the SEC would likely seek to bar her from acting
as an officer or director of a publicly traded company.
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- She is already under investigation by the U.S. Justice
Department over the stock sales.
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- Martha Stewart Living has attempted to move other staffers
into the limelight since Stewart's legal problems have come to the fore,
prominently featuring them in the company's magazine, for example.
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- "Filing charges doesn't mean she'd necessarily have
to step down, but it ratchets up the pressure another notch," said
Seth Farber, a partner with law firm Dewey Ballantine, and a former federal
prosecutor. "In prosecuting those charges the SEC would seek to bar
her from serving as an officer or director."
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- But separating Stewart from her company would be no simple
task, since she created it in her own image. Martha Stewart Living issued
a statement last month denying reports it was actively looking for a new
CEO.
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- News that the SEC enforcement unit plans to recommend
charges against Stewart was first reported in the Wall Street Journal's
online edition.
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- The move by the SEC comes a week after former ImClone
CEO Samuel Waksal, a friend of Stewart, pleaded guilty to some insider
trading charges.
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- Prosecutors are already weighing charges that Stewart
dumped ImClone stock after allegedly getting inside information from Waksal
that one of its cancer drugs would not get federal approval, and also that
she subsequently made false statements about the stock sale.
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- The SEC informed Stewart of its plans with a so-called
Wells Notice, the source said, which gives Stewart 30 days to respond to
charges. Any final charges would have to be approved by the entire SEC
in Washington.
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