S.E.C. Puts Martha Stewart on Notice

By Stephen M. Silverman

Tuesday October 22, 2002 01:00 PM EDT

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Martha Stewart has been formally notified by the Securities and Exchange Commission that it has enough evidence to bring a civil complaint against her following her sale of nearly 4,000 shares of ImClone Systems stock late last year, according to published reports.

The S.E.C. notice actually was sent on Sept. 12, reports The New York Times, which goes on to say that defense lawyers for the domestic diva filed a formal response earlier this month.

The S.E.C. notice strongly indicates that the government's probe into Stewart's stock dealings is moving ahead. The Wall Street Journal reports that federal prosecutors in New York are "weighing possible criminal charges of securities fraud, obstruction of justice and making false statements about the reason for her sale."

A decision on whether criminal charges will be filed against Stewart is expected soon, says the Journal.

The news of the formal notice comes a week after Stewart's friend, former ImClone CEO Samuel Waksal, 55, pleaded guilty to insider-trading charges. Prosecutors are already weighing allegations that Stewart, 60, unloaded her ImClone stock after allegedly receiving inside information from Waksal that one of the biotech company's cancer drugs would not get federal approval, and also that she subsequently made false statements about the stock sale.

Stewart has insisted all along that she's done nothing unlawful. A spokesperson for Stewart and another for her company, Martha Stewart Living Omnimedia, both declined comment to The New York Times regarding the S.E.C. notice.