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. Last Updated: 07/27/2016

Embattled Style Queen Resigns

NEW YORK -- Martha Stewart stepped down as head of the company she built on gracious living -- a media empire now scarred by an indictment that could send its taste-conscious founder to prison.

Stewart resigned as chairman and CEO of Martha Stewart Living Omnimedia Inc., which has made her a fortune and stamped her style on everything from magazines and TV screens to bed linens and bath towels. She plans to stay on as creative chief and a member of the board.

Stewart's resignation late Wednesday came hours after federal prosecutors in New York charged her with obstruction of justice, conspiracy, securities fraud and lying to investigators.

She pleaded innocent on all counts before a federal judge.

The indictment stems from Stewart's sale of nearly 4,000 shares of the biotechnology company ImClone Systems on Dec. 27, 2001 -- the day before a disappointing government report on ImClone sent its stock price tumbling.

Also indicted was Peter Bacanovic, Stewart's former broker at Merrill Lynch, who prosecutors say illegally sent word to Stewart that the family of ImClone founder Samuel Waksal was unloading shares.

Bacanovic also pleaded innocent to all counts against him, including perjury and obstruction of justice.

In an open letter published as a full-page ad in USA Today on Thursday, Stewart said, "I want you to know that I am innocent -- and that I will fight to clear my name."

"I simply returned a call from my stockbroker," Stewart wrote. "Based in large part on prior discussions with my broker about price, I authorized a sale of my remaining shares in a biotech company called ImClone. I later denied any wrongdoing in public statements and voluntary interviews with prosecutors. The government's attempt to criminalize these actions makes no sense to me."

The letter was also published on a web site -- marthatalks.com -- where Stewart said she would post information about the case.

The charges carry a maximum penalty of 30 years in prison and a $2 million fine for Stewart, and 25 years and $1.25 million for Bacanovic. Any sentences would likely be much lighter under federal guidelines.

On the heels of the indictment, the Securities and Exchange Commission filed a civil complaint seeking to ban Stewart from ever leading a public company and to limit her activity as officer of a public company.

Regulators also want the court to force Stewart and Bacanovic to pay more than $45,000 -- the losses they say Stewart avoided by unloading ImClone stock before Wall Street learned legally of the disappointing ImClone news.

At a press conference, U.S. Attorney James Comey told reporters that the case was about Stewart's lies to the SEC, the FBI and to her own investors.

"Martha Stewart is being prosecuted not because of who she is but because of what she did," he said.

Her attorney, Robert Morvillo, said Stewart was being unfairly prosecuted: "Is it because she is a woman who has successfully competed in a man's business world by virtue of her talent, hard work and demanding standards?"

At a hearing before U.S. District Judge Miriam Goldman Cedarbaum, Stewart was released without bail until her next court appearance June 19.

Stewart sold her stock one day before the Food and Drug Administration declined to review ImClone's application for approval of Erbitux, touted by the company as a promising cancer drug. ImClone's stock subsequently plunged.