Stewart is charged in Manhattan

After battling insider-trading allegations for 16 months, the domestic diva Martha Stewart (61) was charged yesterday with securities fraud and obstruction of justice, writes Conor O'Clery, North America Editor

The nine charges arise from her sale of shares in ImClone Systems, a biotechnology company run at the time by a close friend, Mr Sam Waksal.

True to style, Ms Stewart arrived at court in Manhattan wearing a white rain coat under a matching umbrella, and swept through a melee of reporters and television crews.

She has protested her innocence and will fight the charges.

The indictment followed the failure of negotiations with the US attorney's office during which Ms Stewart apparently refused any plea that would entail a prison sentence.

On December 6th, 2001, Mr Waksal learned that the US Food and Drug Administration intended to reject ImClone's major new cancer drug, Erbitux, a blow which would depress share value. Next day, and a day before the news became public, Ms Stewart, whose company Martha Stewart Living Omnimedia was worth hundreds of millions of dollars, sold 3,928 shares in ImClone at $58 a share.

She has repeatedly said the sale was triggered by a standing order to sell if the stock fell below $60. US Attorney Mr James Comey yesterday said that Ms Stewart had lied to the FBI and the Securities and Exchange Commission about this, and misled the public and shareholders in her firm about the transaction.

Her stockbroker, Mr Peter Bacanovic of Merrill Lynch, who was also indicted on charges of obstruction of justice and perjury, doctored his list of Ms Stewart's shares by adding a note "at 60" in blue pen beside ImClone stock sometime after the sale of the stock, Mr Comey said.

His other earlier notes on her stock portfolio were in blue pen but the ink proved different under analysis, he said.

This was intended to give credibility to Ms Stewart's story about a standing instruction to her broker.

Ms Stewart was also accused of altering a note of her message to the broker.

Mr Waksal was removed as head of ImClone a year ago and has pleaded guilty to insider trading. He will be sentenced next week.

Ms Stewart is expected to step down as head of her company, which was built from a catering company into a media and style empire. She did not attend a shareholders' meeting on Tuesday at which it first emerged that the prospect of indictment was imminent.

Mr Comey said the issue was about lying, not about Ms Stewart's celebrity status.