Martha Stewart Spent Five Months in Prison — a Look Back at Her Legal Troubles

Manuela Cardiga
Sep 28, 2020
01:00 P.M.
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In 2003, the iconic ultimate hostess and former stockbroker, Martha Stewart, was faced with federal charges after she was accused of insider trading.

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Lifestyle pundit and home-making guru Martha Stewart was one of the US' most influential women, but she ended up in prison for insider trading and served out a 5-month sentence in federal prison. Prison meatloaf was definitely not the new paté...

Why she went to prison -- or why she even offended -- is a mystery. Stewart was a self-made billionaire, and she went to prison over a shady deal, which saved her $45,673.

Martha Stewart prepares the Classic Beyond Breakfast Sausage with spinach and sweet onion frittata on March 10, 2020 in New York City | Source: Getty Images

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FROM FABULOUS TO FELON

Stewart's dizzying rise began in the 80s when her first lifestyle and party-planning book became a bestseller. It was quickly followed by several other books, all bestsellers, and she launched her own magazine, "Martha Stewart Living."

In 1993,  "Martha Stewart Living" became a TV show, and in 1997, she created Martha Stewart Living Omnimedia, her own company, which gave her complete control over her brand. Stewart was one of the most influential women in the world and about to become one of the richest.

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Stewart took Martha Stewart Living Omnimedia to the New York Stock Exchange in 1999. The shares were set to sell at $18 per share, but by the end of the first day's trading, they were selling at $38. Stewart was officially a billionaire.

Stewart was wealthy beyond the wildest dreams of your garden-variety millionaire, and yet she would end up committing a felony to save herself under $50,000, and bring her world crashing down.

Although she never provided details of her time in prison, Stewart would go on to describe it as a horrific experience

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HOW IT ALL BEGAN

Stewart, who had been a stockbroker, had in her portfolio close to 4,000 shares of ImClone Systems, a pharmaceutical company that specialized in developing oncology medication. 

In late 2001, one of their experimental drugs, Erbitux, which was expected to be revolutionary, failed to gain FDA approval, and once the news went public, their shares would be expected to drop.

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INSIDER TRADING

The day before the FDA announcement, Stewart hastily sold her $230,000 share package in ImClone. It later transpired that Stewart had been informed by a former broker contact that Erbitux hadn't been approved and that ImClone's stock was about to take a dive.

Stewart's use of the confidential information to save herself from a financial loss was a crime and one which would cost her dearly. Along with several others, Stewart was targeted for a federal investigation and was indicted on nine counts, including charges of securities fraud and obstruction of justice.

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Stewart was forced to step down from the board of directors of the New York Stock Exchange and as CEO of her own company. In March 2004, she was found guilty of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators, and was sentenced to 5 months in prison.

In addition, Stewart would be under electronic monitoring for two years after her release. But first, the guru of style, one of the world's most admired chefs, would have to do a stint behind bars.

Snoop Dogg and Martha Stewart at the 2017 MTV Movie and TV Awards in Los Angeles | Source: Getty Images

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Although she never provided details of her time in prison, Stewart would go on to describe it as a horrific experience and that she had drawn nothing positive out of it. She said:

“It was horrifying, and no one — no one — should have to go through that kind of indignity, really, except for murderers, and there are a few other categories.”

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Like a true survivor, Stewart served out her five months in jail, plus her additional five months of house arrest, and her probation. She has taken up her career and, to some measure, made a comeback, even co-hosting a cooking show with rap icon Snoop Dogg.

15 years after her stint in prison, Stewart has expanded and rebuilt her brand, and on July 31, 2020, she launched a new gardening show called "Martha Knows Best" on HGTV.

Stewart has moved on, but she never recovered that universal approval and adulation she once enjoyed, and the ghost of her misdeed will surface to haunt her for the rest of her life.

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