Martha Stewart's Trial and Sentence
In June 2003, a grand jury in New York indicted Martha Stewart of three criminal charged relating to her 2001 sale of ImClone stock: securities fraud, obstruction of justice, and conspiracy. Shortly afterwards, the U.S. Securities and Exchange Commission filed a civil suit against Stewart which claimed that she had violated the Securities Act of 1933 and the Securities Exchange Act of 1934 which define various types of investment fraud. As the noted founder of a media empire and a celebrity in her own right, Martha Stewart's criminal trial attracted considerable attention in the news media.
Martha was sent to jail after being convicted of conspiracy, obstruction of justice, and two counts of making false statements to a federal investigator. Fortunately for Stewart, the charge of securities fraud, which can have a ten year prison sentence, was dismissed by the judge presiding over the case. Peter Bacanovic, Martha Stewart's stock broker, was also sent to jail and fined for his role in the Martha Stewart stock scandal. Stewart served a five month prison sentence at a minimum security facility located in West Virginia. After being released, Stewart then had a five month house arrest sentence where she was permitted to leave her home for a set period of time each week in order to conduct business such as serving on the board for her company, Martha Stewart Living Omnimedia.
In addition to serving her prison term and house arrest, Stewart has suffered other consequences as a result of her actions. She has been denied entry to Canada and the United Kingdom due to her criminal record. As part of her settlement with the SEC, Stewart paid a fine and had to agree to a five year ban from serving as a director of a company, CFO or other position involved in preparing financial statements. After this ban period elapsed, Stewart became legally able to serve on boards and serve as an executive. Stewart is not barred from stock investing as a result of this case.