Stewart to pay $195,000 to end ImClone 'nightmare'

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Lifestyle maven Martha Stewart settled with securities regulators Monday, putting most of her legal troubles behind her after a drawn-out public saga.

Stewart, who did not admit or deny guilt, agreed to pay a financial penalty of $195,000, which includes a disgorgement of the $45,673 she avoided losing on ImClone stock. Stewart sold shares of the biotech company after allegedly being tipped off about upcoming bad news regarding its cancer drug Erbitux.

She was also barred from serving as a director of a public company for five years and is limited in the role she may play in a public company either as an employee or officer. Meanwhile, Peter Bacanovic, the former Merrill Lynch broker who allegedly tipped her off and who already is barred from the industry, agreed to pay a $75,000 fine and disgorge $510 in commissions.

"We're satisfied with this resolution in that it appropriately addresses both the illegal insider-trading misconduct and the subsequent obstructionist conduct," says Helene Glotzer of the SEC.

Mark Maddox, securities attorney at Maddox Hargett & Caruso, says Stewart's punishment was not inflated due to her notoriety. "It doesn't sound too hard or too soft," he says.

In an e-mailed comment from spokeswoman Samantha Schabel, Stewart says, "This brings closure to a personal matter, and my personal nightmare has come to an end."

There's still a securities class action pending against Stewart and Martha Stewart Living Omnimedia, according to a regulatory filing. Even so, Monday's settlement clears a vast bulk of the legal trouble for:

*Stewart the person. The settlement allows Stewart to remain in her current post, "founder," at the company, says Jill Fisch, law professor at Fordham University. "She is quite involved in the creative direction of the company," she says.

*Stewart the company. Clearing the regulatory clouds will help attract advertisers who were afraid the scandal would flare up again, says Dennis McAlpine at McAlpine Associates. "It removes the sense Martha will be dragged through the mud again," he says. The company is struggling to return to profitability after losing money nine of the past 10 quarters. The stock is down more than 50% since it started trading on Oct. 19, 1999.

But Stewart's run-in with justice shows how even powerful people are now held accountable for breaches in their personal lives, says Michael Josephson of the Josephson Institute of Ethics. "Martha Stewart's name will always be attached to that change," he says

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