Martha is accused in second stock-trade complaint
As if Martha Stewart weren’t already in enough trouble over her alleged insider trading of ImClone stock, she now faces an accusation that she committed insider trading with the stock of her own company, Martha Stewart Living Omnimedia. That accusation comes in the form of a lawsuit, which the New York Daily News says was filed in Manhattan Federal Court on Tuesday, that says Stewart sold $45 million of her own stock on Jan. 8, on the day that ImClone (then run by her pal Sam Waksal) was informed it was the subject of its own insider-trading probe. As a result, the suit claims, she and other MSLO executives who sold their own shares of the company’s stock profited in the months before news of Stewart’s ImClone stock sale broke in June, and before the price of MSLO stock dropped 60 percent in the wake of the ImClone scandal.
Investor Harold Rosen filed the suit, which he hopes to expand to class-action status for all MSLO investors who bought stock in the first months of 2002. The suit argues that Stewart must have known that her association with ImClone, whose price tanked the day after she sold her shares in December, would ultimately taint the reputation of her own company. ”Being a former stockbroker, Stewart knew that the suspicious timing of her ImClone stock sales would bring public, if not legal, scrutiny,” the suit says.
Stewart, who is the subject of three insider-trading probes but has not been charged with a crime, turned over to Congress more than 1,000 pages of documents related to her ImClone trade on Tuesday, but some of the pages had blacked-out sections, and the House Committee behind the congressional investigation warned that, if it finds the huge stack of redacted papers to be misleading or incomplete, it may subpoena her to testify. But even if Stewart is cleared of any wrongdoing, the lawsuit says, the damage is done. ”Regardless of whether Stewart is ever formally charged with or convicted of insider trading relating to her ImClone stock sales, her ill-conceived cover-up has now painted her as a liar and has forever tarnished her image and reputation, each of which are [Martha Stewart Living Omnimedia’s] most important assets,” the suit says.
Responding to the suit, MSLO spokesman Steven Lipin said that several of the company’s executives who sold stock this year still have substantial stock options in the company. ”The company believes the lawsuit is without foundation, and we intend to defend it aggressively,” he said.