Martha shareholder lawsuit dismissed

Stewart still faces federal obstruction-of-justice charges

Martha Stewart and other directors of her namesake company won dismissal of a lawsuit by an investor who claimed the company was harmed by her questionable stock sales.

Delaware Chancery Judge William B. Chandler III dismissed the case in an opinion made public Friday, saying directors of Martha Stewart Living Omnimedia had no legal obligation to monitor the personal activities of Stewart, who faces federal obstruction-of-justice charges in connection with her sale of $228,000 in ImClone Systems stock in 2001.

Stewart, the company’s former CEO, has denied charges she conspired with Merrill Lynch broker Peter Bacanovic to obstruct an investigation into the stock sale. Stewart could receive up to 10 years in prison if convicted.

“It’s troubling,” Chandler wrote, that shareholders’ lawyers continue to file such lawsuits, in behalf of companies such as Stewart’s, “on the basis of precious little investigation beyond perusal of the morning newspapers.”

Complaint cites information from the New York Times, the Wall Street Journal and CBS’ “The Early Show.”

“We are very gratified by the decision and the court’s findings in favor of the company and its directors,” said Jim Fingeroth, a spokesman for Martha Stewart Living Omnimedia.

Shares of Martha Stewart Living Omnimedia have fallen more than 50% since the beginning of last year. Shares closed up 1¢ Friday to $9.23.

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