Martha Stewart Defends Stock Sale

Deflecting speculation about possible insider trading, queen of style Martha Stewart again defended her sale of almost 4,000 shares of ImClone Systems Inc. in late December as "entirely proper and lawful."

"The media focus on ImClone has generated an enormous amount of misinformation and confusion," said Stewart, chairwoman and chief executive of Martha Stewart Living Omnimedia Inc., whose stock has taken a beating since reports surfaced that her sale may have been based on inside information.

Stewart sold the shares a day before the Food and Drug Administration made public its refusal to review ImClone's application for the cancer drug Erbitux. ImClone's stock price subsequently plummeted. [Stewart is a contributor to CBS News' The Early Show.]

Congressional investigators are probing whether Stewart received inside information from Sam Waksal, a personal friend and the former chief executive of ImClone.

Waksal was arrested last week on charges of insider trading for allegedly trying to sell stock and tip off family members after learning of the FDA's decision.

Since June 6, when congressional investigators said they were looking into Stewart's sale of ImClone stock, Martha Stewart Living Omnimedia's shares have dropped more than 20 percent.

The investigation is seen by some as detrimental to Stewart's stock because the company is so closely associated with her image.

Still, analysts believe her brand can deflect the scandal. Stewart, whose persona is tied to her label, oversees an empire that includes publishing, television and merchandise from towels to cookware.

"I think consumers leave the headlines at the entrance to the store. The much bigger threat to Martha is when her products are out of stock at Kmart," said Candace Corlett, a principal at WSL Strategic Retail, a market research firm.

Stewart's line of home furnishings and kitchenware is the top sales generator at Kmart Corp., which filed for Chapter 11 bankruptcy in January.

The latest development in the ImClone dispute is a Wall Street Journal report that reveals that Stewart's broker arranged to sell the stock when it fell below $60 after Dec. 10, not in late November, as Stewart's lawyers have indicated to investigators.

The timing of the discussion is crucial in determining whether Stewart had nonpublic information regarding ImClone.

Stewart said Tuesday that she has cooperated fully with the Securities and Exchange Commission and the U.S. Attorney's office.

Ken Johnson, spokesman for the House Commerce and Energy subcommittee, which is investigating the ImClone case, said Stewart's attorney has provided documents requested, including a copy of her cell phone records from Dec. 22 through Jan. 6. Stewart's attorney has also given Merrill Lynch permission to provide documentation of her stock sale.

"They've answered most questions but not the one troubling us the most," Johnson said, referring to the timing of the prearranged order to sell. He said the committee expects to interview her broker, Peter Bacanovic, next week.

Since June 6, when investigators said they were looking into Stewart's stock sale, Martha Stewart Living Omnimedia's shares have dropped more than 20 percent.