|Martha Stewart in her TV studio kitchen.
MARTHA STEWART PROBE DRAINS OMNIMEDIA
Ongoing Investigation Cited in 67% Earnings Drop
EARNINGS AT MARTHA STEWART'S OMNIMEDIA PLUMMET 42%
Impact of Stock Trading Scandal Cited
SEC TO FILE FRAUD CHARGES AGAINST MARTHA STEWART
Report Says Lawyers Notified of Pending Action Over Stock Sale
In a statement issued this morning, the company said it was told by Ms. Stewart's attorneys that the U.S. Attorney for the Southern District of New York has informed them that Ms. Stewart is the target of a criminal investigation and that the U.S. Attorney's office will request a grand jury indictment "in the near future."
Later in the morning, Ms. Stewart's attorney, Robert Morvillo, released a statement saying that "If Martha Stewart is indicted, she intends to declare her innocence and proceed to trial."
A spokesman for the U.S. attorney had no comment on Omnimedia's statement but said it expected no major press releases today on any subject.
The Omnimedia statement said Ms. Stewart also expects to face a Securities and Exchange Commission civil complaint.
Directors eye 'contingencies'
The company also said that its directors have been planning for a number of contingencies and "are evaluating the current situation and will take action as appropriate."
The SEC probe stems from Ms. Stewart's sale of 4,000 shares of ImClone stock in late December 2001, shortly after a conversation with representatives of her broker, Peter Bacanovic. The sale occurred shortly after ImClone learned of the FDA's plan to reject a major new cancer drug, but before the news was made public.
Ms. Stewart has contended the stock sale was the result of a preexisting arrangement with her broker and not due to inside information, but leaders of the House Energy and Commerce Committee have questioned whether she was entirely forthright in explaining to the committee what happened.
Last year in a letter to Attorney General John Ashcroft, U.S. Rep. Billy Tauzin, R-La., joined by ranking Democratic and GOP members of his committee called for a probe into whether Ms. Stewart "knowingly caused materially false representations" to be made to the committee about the reason her shares were sold.