In a Manhattan federal court on Monday, a U.S. judge refused to dismiss a lawsuit by shareholders of Martha Stewart Living Omnimedia Inc.MSO.N , even as Newsweek reported Stewart may be indicted and NBC prepared to televise a less-than-flattering movie about her.
The lawsuit charges that Stewart and other company insiders sold Martha Stewart Living stock before the public became aware that the lifestyle queen was the subject of investigations by federal authorities.
Those investigations, undertaken by the Securities and Exchange Commission and the Justice Department, have looked into Stewart’s sale of nearly 4,000 shares of ImClone Systems Inc.IMCLE.O in Dec. 2001, just before Imclone’s stock fell on disappointing news about a cancer drug.
Escalating her legal troubles, Newsweek magazine reported on Monday that the U.S. attorney in Manhattan is “still strongly considering indicting” Martha Stewart for insider trading and obstruction of justice in the ImClone case.
What’s more, NBC was set on Monday to air a made-for-TV movie about Stewart’s rise to become one of the most successful businesswomen in America.
It was the latest bad news for Stewart’s company, which has been ravaged by an investigation into her sale of ImClone shares. Martha Stewart Living Omnimedia stock plunged 85 cents, or 7.42 percent, to close at $10.61.
In a packed courtroom in lower Manhattan, lawyers representing Stewart, her company and other executives asked the federal judge overseeing the case to dismiss the lawsuit.
Judge John Sprizzo rejected the request, setting a Nov. 24 date for the start of pre-trial hearings.
“The motion to dismiss the case against all defendants should be denied,” Sprizzo told a crowded Federal court room in Manhattan. Stewart did not appear in court.
The lawsuit alleges that Martha Stewart Living insiders sold about 5.3 million shares, making more than $79 million in illegal profits and avoiding losses they would have suffered if the public had known in advance about investigations into Stewart’s sale of ImClone st