Martha Stewart shares rise as fraud charges loom

Wall Street was puzzled by the possibility that Martha Stewart might soon face securities fraud charges for her alleged role in the ImClone insider trading scandal.

Overnight, shares in her company added 7%.

The Securities and Exchange Commission (SEC) would not comment on reports that it will soon file charges against Stewart.

SEC spokesman John Heine said that in cases where executives are found to have violated securities law, generally the punishment ranges from fines to being barred from serving as a director or executive of a public company.

Stewart has been under fire for selling nearly 4,000 shares of biotech company ImClone Systems last December, one day before the Food and Drug Administration announced that it would not review the application for ImClone's cancer drug, Erbitux. That news sent the stock plummeting.

Overnight its shares were down 31c to US$7.48.

Since the sale, the assistant to Stewart's broker at Merrill Lynch has claimed that Stewart sold the stock after learning that her friend, former ImClone CEO Sam Waksal, was looking to sell shares. Waksal pleaded guilty to fraud charges in an insider-trading scheme earlier this month.