New York Stock Exchange CEO Richard Grasso took the phone call Thursday morning and minutes later accepted Martha Stewart’s resignation from the NYSE board, less than four months after she was elected.
According to people familiar with the discussion, Grasso stressed that he personally had high regard for Stewart. But both agreed the 61-year-old publisher and home decorating expert’s position had become untenable amid a damaging inside-trading probe.
Stewart’s resignation came less than a day after an assistant to her stockbroker at Merrill Lynch pleaded guilty to a charge that he accepted gifts from his superior in return for keeping quiet about circumstances surrounding Stewart’s December sale of almost 4,000 shares in biotech firm ImClone.
Prosecutors believe Stewart traded on inside information that might have originated with Sam Waksal, former ImClone CEO and Stewart’s friend.
Waksal was charged in an inside-trading complaint filed in June. He pleaded not guilty to a 13-count indictment Aug. 12 and is negotiating a possible plea deal. Stewart maintains that her sale was lawful and based on a previous agreement with her broker to unload ImClone shares if the price fell below $60.
News of Stewart’s NYSE resignation drove shares in her company, Martha Stewart Living Omnimedia, to $6.21, down almost 9% from Wednesday and the lowest ever. The shares have plummeted 67%, wiping out $630 million in market value, since June 6, the day before a congressional panel said it was investigating Stewart’s ImClone sale.
Wednesday’s guilty plea by Douglas Faneuil could help Justice Department prosecutors build a case against Stewart, although a Justice spokesman refused to comment.
Representatives of Martha Stewart and lawyers for the former Merrill Lynch brokers both were dismissed Wednesday also declined comment.
The NYSE also announced Citigroup’s Michael Carpenter had quit its board. The move comes after Carpenter was ousted last month as head of the company’s Salomon Smith Barney investment-banking unit amid a growing scandal over Wall Street allocation practices for shares in initial public offerings.
Stewart’s resignation letter did not mention the ongoing investigation into whether she might have violated federal securities laws through her sale of ImClone stock, but referred only to requirements of a ”busy and demanding corporate life.”
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