Martha Stewart’s Insider Trading Conviction and Prison Sentence Explained

Businesswoman and television personality Martha Stewart’s time in prison is revisited in Netflix documentary Martha. The lifestyle entrepreneur known for her culinary and design expertise was arrested for insider trading on the American stock market. Stewart has reached a new audience in recent years by partnering with rapper Snoop Dogg on his cooking show. Martha and Snoop’s Potluck Dinner.

Stewart was accused of insider trading on the stock market in shares of biomedical engineering company ImClone. ImClone was expected to launch Erbitux, a cancer drug designed to combat monoclonal antibodies, in 2001 (via CNN). The FDA did not end up regulating the drug for public use, and the U.S. Securities and Exchange Commission found key investors sold their shares following a sharp decline in the company’s value before the FDA’s decision became public knowledge. Stewart was among the investors, leading to his trial and sentencing.

Martha Stewart was found guilty of insider trading in 2004

The shares belonged to ImClone

Insider trading refers to selling shares based on non-public information about the company in question (through Investopedia) and is normally prosecuted as a serious crime. In Stewart’s case, the information at issue was ImClone’s lack of FDA approval, which was not yet public knowledge. By selling his ImClone shares, Stewart allegedly avoided a loss of $45,673 by selling all 3,928 shares on December 27, 2001. Stewart received the information about Erbitux from his broker, Peter Bacanovic, who worked for brokerage Merrill Lynch (via US Securities and Exchange Commission). Share value plummeted 16% the next day.

It was then revealed that ImClone founder Samuel D. Waskal was also guilty of insider trading after he told his friends and family to sell their shares ahead of the FDA’s public decision (via SEC Commission). Although Stewart was not originally implicated in the case, when investigators looked into Bacanovic’s involvement, her sales were discovered, leading to her highly publicized trial in 2004. Stewart maintained her innocence on the stand, but was found guilty.

Martha Stewart’s Sentence and Where She Served Prison Time

Stewart spent his incarceration in West Virginia

Stewart was indicted and brought to trial in 2004, three years after the initial sale of her shares. She was found guilty of insider trading and sentenced to five months in prison, five months of home confinement and two years of probation (via PEOPLE). Stewart was incarcerated at the Alderson Federal Prison camp, which she once compared to a college campus where she learned to work with other inmates in harmony (via PEOPLE). THE the prison was located in a remote area of ​​West Virginia. A friend of Stewart’s knitted her a poncho that she wore when she was released, when she told the mogul to “use it in good health” (through TODAY).

After her five months in prison, Stewart remained under house arrest for another five months and was only allowed to leave her home for emergencies, parole officer meetings or doctor’s appointments. At this point, Stewart had to take into account the state of his own company, Martha Stewart Living Omnimedia, which, prior to his arrest, printed the magazine Martha Stewart Living. Both ImClone’s Waskal and Bacanovic were additionally sentenced to prison for their respective roles in the insider trading case, serving seven years and five months respectively (via SEC).

How long did Martha Stewart spend in prison?

Stewart was imprisoned for five months

Martha Stewart was incarcerated at Alderson for five months among mainly financial and non-violent criminals. The only facility for women was not a maximum security prison due to the nature of Stewart’s crimes. The prison includes dormitory-style housing and a minimum security-to-inmate ratio (via Department of Prisons). The installation is often nicknamed “The most comfortable in America prison“for its campus-style functionality, educational opportunities, food, and minimal perimeter fencing (via Business Insider). On the contrary, maximum security prisons are often under strict surveillance and contained within barbed wire fences.

Alderson offers apprenticeships in a variety of disciplines available to inmates, including welding, cooking, electrician, plumbing, teaching and more (via Federal Penitentiary Defense Lawyer.com). The programs they aim to begin rehabilitating inmates until their eventual release from prison, preparing them for success. Although Stewart requested kitchen duties, she was prohibited from doing so, instead being tasked with cleaning, due to her already public persona as a lifestyle entrepreneur (via TODAY). Stewart remains an important figure in the world of American lifestyle, largely due to her idyllic homemade holiday recipe ideas.

What happened after Martha Stewart was released from prison

Stewart served five months under house arrest and was on probation for two years.

After his release from Alderson, Stewart spent five months under house arrest and two years on probation. During this time, Stewart struggled to rehabilitate his reputation following his stint in prison. Stewart was determined not to be defined by her criminal record and immediately resumed publishing Martha Stewart alive. She went on to launch a line of ready-made household items with KMart following its launch in 2005 (through Variety).

She quickly returned to television in the same year with The Martha Stewart Showaired on the Hallmark Channel from 2005 to 2012, when it was canceled due to rising production costs. Stewart also appeared in The Apprentice, a reality show once hosted by disgraced real estate mogul and former US President Donald J. Trump. She later made a guest appearance on Ugly Betty.

Stewart continued to collaborate with KB Home on a line of homes to be built initially in Cary, North Carolina (via Knowledge base home). She then began to host a radio show on Sirius XM, which is still running since its inception in 2005. Stewart developed other homeware and craft lines with Macy’s and Walmart in the 2010s. After the cancellation of The Martha Stewart Show, Stewart hosted Martha bakes on Hallmark and Martha Stewart’s Cooking School on CBS.

Stewart achieved a new level of fame in 2016 when VH1 launched her cooking show with rapper Snoop Dogg Martha and Snoop’s Potluck Dinner. The unlikely duo immediately garnered high ratings, and the pair remain close friends to this day. The show’s fusion of Stewart’s lifestyle brand and Snoop’s legendary ties to hip-hop culture resonated with a wide audience, cementing them in the cooking show’s pop culture zeitgest. Despite the setback of his time in prison, Martha proves that Stewart’s journey is still ongoing and that the mogul is always preparing something new for the public.

Sources: CNN, Investopedia, Securities and Exchange Commission, PEOPLE, TODAY, Bureau of Prisons, Business Insider, Federal Prison Defense Attorney, Variety, KB Home