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Friday, 4 October, 2002, 08:48 GMT 09:48 UK
Martha Stewart quits exchange board
Richard Grasso, chief executive, New York Stock Exchange
Mr Grasso said he was "saddened to lose" Ms Stewart
US lifestyle guru Martha Stewart has resigned from the board of the New York Stock Exchange, less than four months after taking the post.

Martha Stewart rings the opening bell on the New York Stock Exchange, 19 October 2002
Ms Stewart's stint as a member of the exchange's board was short-lived
Ms Stewart's resignation came after federal prosecutors said a key witness had agreed to testify against her as an insider trading scandal continues to unfold.

"I did not want the media attention currently surrounding me to distract from the important work of the New York Stock Exchange and thus felt it was appropriate to resign," Ms Stewart said.

Her contribution to the exchange was praised by chief executive Richard Grasso who said he was "saddened" to lose an entrepreneur who had "built a brand and a company admired around the world".

Innocent

Ms Stewart has been accused of using inside information to guide her sale of 4,000 shares of biotech firm ImClone on 27 December 2001 - just one day before the company's key cancer treatment was thrown out by regulators, sending the share price through the floor.


Prosecutors wouldn't have made the deal with Mr Faneuil if they didn't think it would lead them right to Stewart's door

Robert Mintz, former federal prosecutor

ImClone co-founder and former chief executive Sam Waksal, a friend of Ms Stewart, was in August indicted for telling members of his family to sell shares in the company ahead of the fall.

Ms Stewart has denied the accusations against her, insisting that she had already arranged with her broker to sell once the price of ImClone slipped below $60.

That happened on 26 December, the day before she offloaded the holding. Mr Waksal has also pleaded innocent.

Prosecution

The US Justice Department has been asked to conduct a criminal investigation into whether Mr Stewart, in a previous statement to lawmakers, had knowingly lied about the share sale.

Ahead of Ms Stewart's resignation, Douglas Faneuil, an assistant to her Merrill Lynch broker Peter Bacanovic, pleaded guilty to a misdemeanour charge of having accepted extra holiday time, free flights and raised commission in exchange for keeping his mouth shut about the share sale.

As part of a deal, Mr Faneuil agreed to testify against Ms Stewart and others expected to face charges linked to the insider trading scandal.

"Prosecutors wouldn't have made the deal with Mr Faneuil if they didn't think it would lead them right to Stewart's door," said former federal prosecutor, Robert Mintz.

Consequently, Ms Stewart's position as a stock exchange board member had become untenable.

"Given the allegations floating around about Stewart, it becomes problematic and more difficult for her to sit on the board of the New York Stock Exchange," said Charles Elson, director of the Center for Corporate Governance at the University of Delaware.

Shares of Martha Stewart Living Omnimedia fell almost 9% to $6.21 on Thursday, extending a 65% fall since investors first got wind of the scandal.

See also:

10 Sep 02 | Business
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07 Aug 02 | Business
04 Aug 02 | Business
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