Martha resigns, takes her case to the public. In an open letter, she insists she's done nothing illegal

By Gary Susman
Updated June 05, 2003 at 04:00 AM EDT

Hours after pleading not guilty on Wednesday to a nine-count federal indictment stemming from her controversial December 2001 sale of her shares of ImClone stock, Martha Stewart resigned as chief executive officer of the company she founded and took public, Martha Stewart Living Omnimedia. The move was not unexpected, since she’s also facing a lawsuit from the Securities and Exchange Commission over the alleged insider trading, a suit that could have forced her to step down. Still, even as she insisted on her innocence in court, she made a rare statement to the public as well in which she denied any wrongdoing.

Stewart’s statement, published as an open letter in USA Today and on the website, in which she denied receiving illegal inside information from her broker, Peter Bacanovic (who also pleaded not guilty Wednesday to five federal charges). ”I simply returned a call from my stockbroker,” she writes. ”Based in large part on prior discussions with my broker about price, I authorized a sale of my remaining shares in a biotech company called ImClone. I later denied any wrongdoing in public statements and in voluntary interviews with prosecutors. The government’s attempt to criminalize these actions makes no sense to me.”

Stewart’s lawyer, Robert Morvillo, spun the indictment as a vindication, noting that even federal prosecutors are no longer arguing that Bacanovic told Stewart that ImClone’s cancer drug Erbitux was about to be rejected by the Food and Drug Administration. (Prosecutors do charge that Bacanovic told her that the family of Stewart’s friend, ImClone CEO Sam Waksal, was unloading its shares.) Morvillo all but accused the government of publicity-seeking, sexism, and trying to distract the public from its failure to nail executives from Enron and WorldCom involved in larger financial scandals. (Stewart’s ImClone trade may have saved her just $45,000, the indictment says.) In a statement, Morvillo asks of the indictment, ”Is it for publicity purposes because Martha Stewart is a celebrity? Is it because she is a woman who has successfully competed in a man’s business world by virtue of her talent, hard work and demanding standards?”

U.S. Attorney James Comey disputed Morvillo’s allegations. ”Martha Stewart is being prosecuted not because of who she is but because of what she did,” he told the Associated Press.