<<...Does Kleiner Perkins have a board seat at Martha Stewart?...>>
HJ: They used to...your good friend John Doer sold his shares and resigned recently -- guess he can't take the heat in the kitchen...=)
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<<...In March, Menlo Park, Calif., venture-capital firm Kleiner, Perkins, Caufield & Byers sold 1.1 million shares of Martha Stewart Living to ValueAct, and nearly all the rest of its stake to other entities. Kleiner Perkins and one of its partners, John Doerr, who until recently served on the Martha Stewart Living board, are named in the suit. Kleiner Perkins called the complaint “a baseless lawsuit” and vowed to file a motion to dismiss the case...>>
Stewart faces new lawsuit
By Tom Hamburger and Jerry Markon
THE WALL STREET JOURNAL
Aug. 22 — A Martha Stewart Living Omnimedia Inc. shareholder sued Ms. Stewart and other officers, alleging they sold company stock before the shares fell sharply on news federal investigators are probing the home-decorating guru for possible insider trading.
THE LAWSUIT’S claims of insider trading in Martha Stewart Living shares could open a new chapter in the saga, which so far has focused on whether Ms. Stewart had inside information when she sold nearly 4,000 shares of ImClone Systems Inc. a day before that company announced bad news that sent its shares tumbling.
‘WITHOUT FOUNDATION’
But the suit, filed on behalf of shareholder Howard Rosen and seeking class-action status in U.S. District Court in New York, doesn’t offer evidence showing Ms. Stewart knew she was under investigation and conveyed that information to others. That could be a problem for the suit. “A lawyer bringing these cases must be able to show probability of insider trading,” said Stephen Crimmins, a partner at Pepper Hamilton LLP and the former deputy chief litigation counsel at the Securities and Exchange Commission. Showing a possibility isn’t sufficient, he said.
Martha Stewart Living, named as a defendant along with nine other parties, said the suit “is without foundation and we intend to defend it aggressively.” Susan Magrino, a spokeswoman for Ms. Stewart, declined to comment.
Federal investigators probing Ms. Stewart for possible insider trading and obstruction of justice in the ImClone case, meanwhile, aren’t pursuing possible insider trading in the shares of Ms. Stewart’s own company, people familiar with the situation said.
The suit alleges Ms. Stewart and her associates sold their shares for $79 million with knowledge “of the fact that Stewart was secretly being investigated for insider trading and that this would severely damage Stewart’s image, the company’s most precious asset.”
Martha Stewart Living shares fell from a high of $20.93 during March to a low of $6.29 early this month, following revelations in June that prosecutors were questioning Ms. Stewart in connection with possible insider trading in ImClone shares. In 4 p.m. New York Stock Exchange composite trading Wednesday, Martha Stewart Living shares fell 14 cents to $8.91.
Ms. Stewart announced Jan. 8 she had sold three million shares in her company to ValueAct Capital Partners, now the company’s second-largest holder behind Ms. Stewart. According to the securities-fraud indictment of ImClone’s former Chief Executive Samuel Waksal, the SEC first requested documents from ImClone “on or about” that date.
In March, Menlo Park, Calif., venture-capital firm Kleiner, Perkins, Caufield & Byers sold 1.1 million shares of Martha Stewart Living to ValueAct, and nearly all the rest of its stake to other entities. Kleiner Perkins and one of its partners, John Doerr, who until recently served on the Martha Stewart Living board, are named in the suit. Kleiner Perkins called the complaint “a baseless lawsuit” and vowed to file a motion to dismiss the case.
People familiar with ValueAct’s thinking say it has no suspicions either seller had an inkling of any investigation into Ms. Stewart’s ImClone sales. The firm became interested in taking a stake in the summer of 2001 and started negotiations with Ms. Stewart in early December, before she sold her ImClone shares.
The lawsuit alleges several top officers sold their entire holdings this spring, though it concedes many of those transactions involved cashing out options, rather than selling shares the executives held for some time.
Many of the executives had previously sold Martha Stewart shares, according to a trading history put together by the plaintiff’s law firm, Milberg Weiss Bershad Hynes & Lerach. The history shows Sharon Patrick, president and chief operating officer, sold 150,000 shares in March, compared with 356,400 in November 2001.
In Washington, House Energy and Commerce Committee officials expressed concern about redacted items in documents Ms. Stewart provided earlier in the week.
A spokeswoman for Ms. Stewart said portions of some documents that were redacted contained proprietary or personal information that “had nothing to do with ImClone.”
The committee has asked Ms. Stewart’s attorneys to come in to review the records with them, and show them original documents from which information was redacted.
Matthew Rose and Chris Adams contributed to this article.
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