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Stewart to contest SEC insider trading charges

[JURIST] Martha Stewart [JURIST news archive] has opted to deny allegations of insider trading brought in a civil lawsuit by the US Securities and Exchange Commission (SEC) [official website; JURIST news archive] rather than settle the charges. Stewart's Thursday response to an SEC complaint [text] claims she acted in good faith and rejects accusations that she used insider tips to make the decision to sell nearly 4,000 shares of ImClone Systems, Inc. [corporate website] stock in 2001. Additionally, Stewart maintains that she sold the ImClone stock in accordance with and agreement she had with her stockbroker, Peter Becanovic, to sell the stock when it dropped below $60. The SEC wants to bar Stewart from reclaiming her position of CEO and chairman of the company she founded, Martha Stewart Living Omnimedia, Inc. [corporate website], as well as bar her from holding an officer position at any other publicly traded company. The SEC complaint was originally filed [SEC press release] in 2003 when Stewart was indicted in criminal court, but was stayed pending the criminal proceedings.

Stewart recently completed [JURIST report] a five-month prison sentence followed by a five-month house arrest sentence under her 2004 criminal conviction [JURIST report] for lying to federal investigators in connection with her sale of ImClone stock. The US Court of Appeals for the Second Circuit upheld her conviction in January [JURIST report]. If Stewart loses this SEC lawsuit, she will potentially face up to three times the losses she avoided by selling her ImClone stock one day before the Food and Drug Administration declined to review a cancer drug developed by ImClone. AP has more.

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Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

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