Martha Stewart sold her ImClone Systems stock on December 27, 2001, one day before bad news from the Food and Drug Administration sent the share price tumbling, and then lied to federal investigators about why she sold. That cover-up, not the trade itself, is what Martha Stewart did that led to a criminal conviction. In 2004, a federal jury found her guilty of conspiracy, obstruction of justice, and making false statements. She served five months in federal prison and later paid roughly $195,000 to settle related civil charges with the Securities and Exchange Commission.
The ImClone Stock Sale
Stewart sold all 3,928 of her ImClone shares through her Merrill Lynch broker, Peter Bacanovic, on December 27, 2001. The next day, ImClone announced that the FDA had refused to review Erbitux, a cancer drug the market had been counting on. The stock fell sharply. Stewart’s early exit spared her about $45,673 in losses.1Securities and Exchange Commission. Martha Stewart and Peter Bacanovic
The timing wasn’t luck. ImClone’s CEO, Sam Waksal, had learned about the FDA decision on December 26 and started trying to unload his own shares. When the Waksal family began selling through Merrill Lynch the next day, Bacanovic noticed and had his assistant, Douglas Faneuil, call Stewart to tell her the Waksals were dumping their ImClone holdings. Stewart told Faneuil to sell her entire position.2U.S. Securities and Exchange Commission. SEC Charges Martha Stewart, Broker Peter Bacanovic with Illegal Insider Trading
Why the Case Was About the Lie, Not the Trade
A common assumption is that Stewart went to prison for insider trading. She didn’t. Federal prosecutors never brought a criminal insider trading charge against her. Stewart wasn’t a corporate insider at ImClone, and proving the legal elements against her would have been harder than what prosecutors did charge.
The criminal case pivoted to what happened after the trade. When FBI agents and SEC investigators asked Stewart why she sold, she and Bacanovic gave the same account: they had a standing agreement to sell her ImClone shares if the price ever dropped below $60. Prosecutors believed that agreement was fabricated after the fact, and that the coordinated effort to sell it to investigators was itself a federal crime.
What She Was Convicted Of
In June 2003, a federal grand jury indicted Stewart on five counts. The trial judge threw out one of them — a securities fraud charge accusing her of deceiving investors in her own company, Martha Stewart Living Omnimedia, by publicly maintaining the ImClone sale was proper — before the case reached the jury, ruling that no reasonable juror could find beyond a reasonable doubt that she lied specifically to prop up her own stock price.3Justia. United States of America v. Martha Stewart and Peter Bacanovic
Four counts went to the jury:
- Conspiracy, for coordinating with Bacanovic on the $60 cover story.
- Two counts of making false statements during her February and April 2002 interviews with the FBI and SEC.
- Obstruction of an agency proceeding, for interfering with the SEC’s investigation.
On March 5, 2004, the jury found her guilty on all four. Bacanovic was convicted on four of the five counts against him.3Justia. United States of America v. Martha Stewart and Peter Bacanovic
On July 16, 2004, the judge sentenced Stewart to five months in federal prison followed by two years of supervised release, including five months of home confinement. She paid a $30,000 fine and a $400 special assessment. Bacanovic got the same prison and supervised-release terms with a $4,000 fine.3Justia. United States of America v. Martha Stewart and Peter Bacanovic
Stewart served her time at Alderson Federal Prison Camp in West Virginia. After her March 2005 release, she finished her home confinement at her Bedford, New York estate, wearing an electronic monitor and limited to 48 hours per week off the property for work, groceries, and religious services. The Second Circuit affirmed the convictions in 2006.3Justia. United States of America v. Martha Stewart and Peter Bacanovic
The Evidence That Sank Her
The government’s strongest witness was Douglas Faneuil, the assistant who actually placed the call to Stewart on December 27. Faneuil testified that Bacanovic told him to pass along the Waksal family’s selling activity, and that Stewart sold immediately after hearing it. His account directly contradicted the pre-arranged $60 story.2U.S. Securities and Exchange Commission. SEC Charges Martha Stewart, Broker Peter Bacanovic with Illegal Insider Trading
Physical evidence pointed the same direction. Investigators recovered a worksheet from Bacanovic’s office that carried a handwritten “@60” notation next to Stewart’s ImClone entry, supposedly documenting the sell agreement. Secret Service forensic analysts examined the ink and concluded the “@60” mark had been made with a different pen from every other entry on the page. The other notations came from a Paper Mate pen; the “@60” ink was unusual and its source couldn’t be identified. Both the government’s ink expert and the defense’s own forensic chemist agreed on that core finding.3Justia. United States of America v. Martha Stewart and Peter Bacanovic
Taken together, Faneuil’s testimony and the ink analysis told the jury that the $60 story had been invented after the trade and the worksheet altered to back it up.
The SEC Civil Settlement
The SEC pursued civil insider trading charges separately from the criminal case. In 2006, Stewart settled without admitting or denying the allegations. Her total payment came to roughly $195,000:
- $58,062 in disgorgement, made up of the $45,673 in losses she avoided plus $12,389 in prejudgment interest.
- A civil penalty of $137,019, calculated at three times the losses avoided.
The settlement also barred her for five years from serving as a director of any public company and restricted her role as an officer or employee of one, keeping her out of financial reporting, SEC filings, audits, and compliance oversight.4U.S. Securities and Exchange Commission. Martha Stewart and Peter Bacanovic Settle SEC Insider Trading Charges Stewart remained the public face of Martha Stewart Living Omnimedia during that stretch, but she had to step out of formal governance for half a decade.5Securities and Exchange Commission. SEC v. Martha Stewart and Peter Bacanovic
Sam Waksal, the ImClone CEO whose tip set the whole sequence in motion, pleaded guilty and was sentenced to 87 months in federal prison.6U.S. Securities and Exchange Commission. Former ImClone CEO Samuel Waksal and Father to Settle SEC Charges
Aftermath and the 2025 Pardon
Stewart rebuilt aggressively after prison, returning to television, signing retail partnerships, co-hosting a cooking show with Snoop Dogg, and appearing on the cover of Sports Illustrated’s swimsuit issue in her eighties. Her estimated net worth has climbed to roughly $400 million.
In early 2025, President Trump granted Stewart a full pardon, wiping her federal convictions from the record more than two decades after the trade that started it all. The scale of the case was always the strange part: Stewart went to prison not over the $45,673 she saved by selling her ImClone shares, but because she lied about why she sold them.