US 'domestic goddess' accused of insider trading

American TV celebrity Martha Stewart, who built her fortune on giving advice on cooking and home decoration, has been charged over an insider-trading scandal that could put her behind bars.

Federal prosecutors accused Stewart, 61, of dumping her stock in a biotechnology company in 2001 based on illegal privileged information, then covering her tracks and lying to investigators and shareholders.

The homemaking guru, who was a billionaire during the 1990s, saved €45,000 (£38,600) from the sale, according to the government.

Her stockbroker was also indicted, and the Securities and Exchange Commission filed a lawsuit levelling similar charges.

“This criminal case is about lying – lying to the FBI, lying to the SEC and investors,” US Attorney James Comey said. “That is conduct that will not be tolerated. Martha Stewart is being prosecuted, not because of who she is, but what she did.”

The indictment charges Stewart with securities fraud, conspiracy, obstruction of justice and making false statements. If convicted of all counts, she could face up to 30 years in prison and $2m (€1.7m) in fines, although the penalty would probably be far lighter under government sentencing guidelines.

In court in New York yesterday, Stewart denied the charges. Stone-faced and speaking deliberately, she told a federal judge: “Not guilty.”

Hours later, she stepped down as chairman and chief executive officer of her media empire.

Her company, Martha Stewart Living Omnimedia, has suffered in the year since the scandal broke, and some analysts say advertisers may pull back even more, stores will stop striking new relationships with the company, and customers may turn away.

A statement from Martha Stewart Living Omnimedia said Stewart would remain on the company’s board.

The charges resulted from an investigation into Stewart’s sale of nearly 4,000 shares of ImClone Systems on December 27, 2001 – the day before an unfavourable Food and Drug Administration decision on ImClone’s cancer drug Erbitux sent its stock tumbling.

Stewart has denied she was tipped off.