NEW YORK — Harried homemaker Martha Stewart, who could be indicted this week on obstruction of justice charges related to her sale of ImClone stock, said Tuesday that she won’t resign.
Stewart made the announcement in a taped statement shown at her company’s annual shareholders meeting in New York.
The meeting was held the same day Martha Stewart Living Omnimedia released a statement saying that Stewart’s attorneys had informed the company the U.S. Attorney’s Office for the Southern District of New York would seek a grand jury indictment against her. Statement also said a civil complaint by the Securities and Exchange Commission was expected.
The developments knocked MSO stock down as much as 20% Tuesday, the biggest single-day dip in almost a year since Stewart’s troubles began. The shares closed at $9.52, down 15%.
Stewart is under investigation for selling $227,000 worth of ImClone stock in December 2001, allegedly based on a tip from ImClone founder Sam Waksal, just before the FDA announced it was rejecting the company’s cancer drug Erbitux.
“That amount is less than her gardening bill,” said one Wall Streeter.
Since the probes became public, Stewart and her company’s shareholders of have lost hundreds of millions of dollars.
Stewart has denied any wrongdoing.
Ironically, it was recently announced that Erbitux has been generating positive data in tests.
Last week, the Justice Dept. rejected a last-minute appeal from Stewart to intervene in the alleged insider trading probe.
This week, hopes that Stewart could somehow sidestep the allegations are all but gone.
“The best-case scenario — that the investigations would conclude without resulting in formal charges — is apparently no longer a possible outcome,” said William Blair & Co. analyst Alissa Goldwasser in a note.
Stewart’s attorney, Robert Morvillo, said Stewart would plead not guilty if indicted.
The most glaring question now is what will happen to MSO without Martha.
“The issue is that she is the company. They have studios in her house. Her name is all over that thing — unlike almost any other media company,” said Harry DeMott, a fund manager at Gothic Capital in New York.
In most cases, shareholders and execs pray that a misbehaving CEO will step down and stop dragging the company through the mud. But Stewart’s name is so connected to the mini-conglom she founded that her departure may not help; it could be just as damaging if she goes as if she stays.
(Jill Goldsmith contributed to this report.)