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‘I am innocent,’ Stewart says

Ad in USA Today says she’ll fight to clear her name

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NEW YORK — Martha Stewart took her defense straight to the public today, writing in a newspaper ad "I am innocent" and "will fight to clear my name" in a federal insider trading case that pressured her to step down as head of her retail and media empire.

The queen of home decor resigned late Wednesday as chairwoman and CEO of Martha Stewart Living Omnimedia, which made her a fortune and stamped her style on everything from magazines and TV screens to bed linens and bath towels. She plans to stay on as creative chief and a member of the board.

Stewart's resignation came hours after federal prosecutors in New York charged her with obstruction of justice, conspiracy, securities fraud and lying to investigators.

She pleaded not guilty on all counts before a federal judge, saying "not guilty" in a calm, deliberate tone and with little expression on her face.

The indictment stems from Stewart's sale of nearly 4,000 shares of ImClone Systems on Dec. 27, 2001 — the day before a disappointing Food and Drug Administration report that sent the biotech company's stock price tumbling. If convicted, she could be sent to prison.

Also indicted was Peter Bacanovic, Stewart's former broker at Merrill Lynch, who prosecutors say illegally sent word to Stewart that the family of ImClone founder Samuel Waksal was planning to unload shares.

Bacanovic also pleaded innocent to all counts against him, including perjury and obstruction of justice.

In an open letter published today as a full-page ad in USA Today, Stewart said, "I want you to know that I am innocent — and that I will fight to clear my name."

"I simply returned a call from my stockbroker," Stewart wrote. "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 voluntary interviews with prosecutors. The government's attempt to criminalize these actions makes no sense to me."

The charges carry a maximum penalty of 30 years in prison and a $2 million fine for Stewart, and 25 years and $1.25 million for Bacanovic. Any sentences would likely be much lighter under federal guidelines.

Following the indictment, the Securities and Exchange Commission filed a civil complaint seeking to ban Stewart, 61, from ever leading a public company and to limit her activity as officer of a public company.

Regulators also want the court to force Stewart and Bacanovic to pay more than $45,000 — the losses they say Stewart avoided by unloading ImClone stock before Wall Street learned legally that the FDA had declined to review ImClone's application for approval of its cancer drug Erbitux.

At a news conference, Manhattan U.S. Attorney James Comey told reporters the case was about Stewart's alleged lies — to the SEC, the FBI and to her own investors.

"Martha Stewart is being prosecuted not because of who she is but because of what she did," he said.

Her attorney said Stewart was being unfairly targeted — perhaps because of her extraordinarily high profile.

Attorney Robert Morvillo also asked: "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?"

At a hearing before U.S. District Judge Miriam Goldman Cedarbaum, Stewart was released without bail until a June 19 court appearance. Stewart ignored reporters and camera crews as she entered and left the federal courthouse in lower Manhattan.

Barry Rashkover, associate regional director of the SEC in New York, said today when asked about Morvillo's complaint, "It wouldn't be appropriate not to charge her because she's a celebrity."

"The average investor has to make investment decisions based on what is public. They see their fortunes rise and fall based on what is public. They don't have access to the kind of information she had," Rashkover told NBC's "Today" show.

The indictment does not claim Stewart had specific knowledge of the FDA decision — only that the Waksals were about to dump shares. She was not charged with insider trading, a more difficult charge to prove than fraud.

Still, according to the government, Bacanovic's tip on the Waksals was funneled through Douglas Faneuil, an assistant who pleaded guilty last year to a misdemeanor charge of taking gifts to keep quiet about Stewart's stock sale.

Stewart even deleted a computer log of a phone message in which Bacanovic told her he thought ImClone was "going to start trading downward," according to the indictment.

The securities-fraud charge claims Stewart misled her own shareholders last summer, playing down the scandal in a clear attempt to keep her company's stock price from falling.

Waksal, a longtime friend of Stewart, will be sentenced next week after pleading guilty to six counts in the insider-trading scandal. He could get six to seven years in prison, plus fines.

At Stewart's company, the scandal had already caused earnings to slump. Revenue in the first quarter dropped 15 percent from the same period a year earlier.

On the Net:

Martha Stewart Living Omnimedia Inc.: www.marthastewart.com

Martha Talks: marthatalks.com/

ImClone Systems Inc.: www.imclone.com