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Martha Stewart In Talks With Prosecutors

May 12, 2003 | FT.COM

Martha Stewart, the American home design icon, is in talks with the US justice department over settling the government's insider trading probe of her activities, although a potential deal could be weeks away.

Lawyers representing Ms Stewart met prosecutors for talks as recently as last week.

Ms Stewart has denied wrongdoing after coming under suspicion for selling about $225,000 worth of shares in a biotechnology company a day before the Food and Drug Administration rejected its promising cancer drug.

The homemaking multimillionaire said the trade was based on a pre-existing agreement with her broker at Merrill Lynch to sell her shares in ImClone once they fell below a certain level. Sam Waksal, ImClone's founder, has pleaded guilty to multiple insider trading charges.

People close to the investigation say that the justice department has had difficulty making a case for insider trading. It has lately focused instead on lesser allegations that Ms Stewart obstructed the investigation.

Ms Stewart was informed by the Securities and Exchange Commission as far back as October that she was likely to face civil charges. It is unusual for the case to be in limbo for so long, a fact that legal experts say reflects a dilemma at the justice department. Although settlement talks have started, people close to the negotiations warned that reaching a deal could be difficult.

One possibility would be for the justice department to drop its case and leave Ms Stewart to face civil charges and a potentially heavy fine from the SEC.

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