NEW YORK — Shares of Martha Stewart Omnimedia Inc. hit an all-time low Wednesday as investors were spooked by reports of a deeper investigation into its chairman and chief executive’s financial dealings.

This story first appeared in the June 27, 2002 issue of WWD. Subscribe Today.

Federal prosecutors widened their probe into Martha Stewart to include possible obstruction of justice and false statements, according to published reports.

Stewart has been under the microscope of prosecutors and the media in recent weeks for possible insider trading after she sold nearly 4,000 shares of ImClone a day before the Food and Drug Administration rejected its experimental cancer treatment. She is friends with Samuel Waksal, ImClone’s former ceo, who was arrested two weeks ago on charges of insider trading.

Shares of the firm plummeted $3.20, or 23.5 percent, to close at $10.40 on the New York Stock Exchange. The stock has deflated $8.61, or 45.3 percent, since June 6, the day before reports of Stewart’s questionable trade surfaced.

Shares of bankrupt Kmart Corp., which relies heavily on Stewart’s home merchandise, slid 6 cents, or 6.4 percent, to 88 cents, on Wednesday.

There were also reports that, despite being unaware of any such understanding, a sales assistant at Merrill Lynch, Stewart’s broker, was pressured to confirm that there was an agreement to sell Stewart’s ImClone holdings if the stock fell below $60 a share.

In all, it was a turbulent day for the financial markets, as investors reacted to the news that the telecommunications firm WorldCom overstated its earnings before interest, taxes, depreciation and amortization by $3.85 billion in 2001 and the first quarter of 2002. Additionally, cable operator Adelphia Communications Corp. filed for Chapter 11 bankruptcy protection in Manhattan federal court after months of disclosures of questionable financial practices.

After opening well below the previous close, the Dow Jones Industrial Average ended up losing only 6.71 points, or 0.1 percent, to close at 9,120.11. Sharing in the pain, the broader Standard & Poor’s 500 slid 2.61 points, or 0.3 percent, to 973.52.

The Nasdaq also opened down, but managed to pick up 5.34 points, or 0.4 percent, for the day to close at 1,429.33.”

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