Injury Attorneys In Washington DC
Martha Stewart tried to avoid losing $45,673 of her ImClone Systemsstock when she sold all 3,928 shares on Dec. 27. 2001. The day after Stewart sold all of her ImClone stock, the company’s stock value plunged 16% after bad news hit about the biotech firm’s key drug. News soon emerged that Stewart had received nonpublic information her stockbroker at Merrill Lynch, Peter Bacanovic, and eventually both the famous client and the stockbroker were in hot water with the SEC and the federal government.
Stewart came under great scrutiny for her actions and finally on Oct. 3, 2002, Stewart resigned her position on the board of directors of the New York Stock Exchange, after Douglas Faneuil, an assistant to Bacanovic, made a deal with prosecutors.
On June 4, 2003, Stewart was indicted by the government on nine counts, including charges of securities fraud, obstruction of justice, felony charges of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators. Subsequently, the lifestyle guru voluntarily stepped down as CEO and Chairwoman of MSLO (Martha Stewart Living Omnimedia), but remained chief creative officer.
In January 2004, Stewart went to trial on five counts. The trial, which was hailed a media-circus, lasted six weeks. During the trial, Faneuil testified that he told Bacanovic told him to tell Stewart that ImClone’s founder and CEO Sam Waksal was trying to sell his own shares that day in advance of a negative ruling by the Food and Drug Administration, which was expected to (and did) cause ImClone shares to decline.
Stewart’s defense attorney Richard Strassberg attacked Faneuil’s credibility, arguing Faneuil had twisted key facts throughout his testimony and describing him as “a person with extreme motivation to shape the truth.”
Meanwhile, Assistant U.S. Attorney Michael Schachter explained during his closing argument, “Martha Stewart and Peter Bacanovic had two options — tell the truth or decline to be interviewed. They chose an option the law does not allow — to lie, conceal and cover up.”
Schachter told the jury, “She thought she would probably never get caught. They made serious mistakes and left behind a trail of evidence.”
Three days before closing arguments were heard, U.S. District Judge Miriam Goldman Cedarbaum dismissed the securities fraud charge against Stewart because “the evidence and inferences the government presents are simply too weak to support a finding beyond a reasonable doubt of criminal intent.”
Stewart had four charges remaining, the most serious being securities fraud, carries a penalty of up to 10 years in prison. In March, Stewart was found guilty of conspiracy, obstruction of justice and lying to federal investigators in March 2004. In July 2004, the judge sentenced the lifestyle guru to serve a five-month term in a federal correctional facility and a two-year period of supervised release, including five months of electronic monitoring. Stewart also had to pay a $30,000 fine.
On Oct. 8, 2004, Stewart began her prison sentence at Federal Prison Camp, Alderson in West Virginia. She was released from FPC Alderson at 12:30 AM on March 4, 2005. Stewart has stated that her prison nickname was “M. Diddy.”
Although not convicted of insider trading, Stewart had to pay a $195,000 settlement in a civil case with the Securities and Exchange Commission in 2006. Under the settlement, Stewart agreed to disgorge $58,062 (including interest from the losses avoided), as well as a civil penalty of three times the loss avoided, or $137,019. She also agreed to a five-year ban from serving as a director, CEO, CFO, or any other officer role responsible for preparing, auditing, or disclosing financial results of any public company.
Ironically, Erbitux, the drug that caused the insider trading scandal, eventually got approved by the FDA to treat certain forms of cancer.