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Martha Stewart’s Insider Trading Conviction & Prison Sentence Explained

Entrepreneur and television personality Martha Stewart’s time in prison is revisited in Netflix’s documentary Martha. The lifestyle entrepreneur known for her cooking and design expertise, was arrested for insider trading on the American stock market. Stewart reached a new audience in recent years by partnering with rapper Snoop Dogg for their cooking show Martha & Snoop’s Potluck Dinner Party.




Stewart was accused of insider trading on the stock market with stocks in biomedical engineering company ImClone. ImClone was expected to release Erbitux, a cancer drug meant to fight monoclonal antibodies, in 2001 (via CNN). The FDA did not wind up regulating the drug for public usage, and the U.S. Securities and Exchange Commission found top investors sold their stocks after a sharp decline in the company’s value before the FDA ruling was public knowledge. Stewart was among the investors, leading to her trial and sentencing.


Martha Stewart Was Found Guilty Of Insider Trading In 2004

The Stocks Belonged To ImClone


Insider trading refers to the selling of stocks on the basis of non-public information about the company in question (via Investopedia) and is typically prosecuted as a felony crime. In Stewart’s case, the information in question was ImClone’s lack of FDA approval, which was not yet public knowledge. By selling off her stocks in ImClone, Stewart reportedly evaded a loss of $45,673 by selling all 3,928 shares on December 27, 2001. Stewart received the information regarding Erbitux from her broker, Peter Bacanovic, who worked for brokerage firm Merrill Lynch (via U.S. Securities and Exchange Commission). The stock value plummeted by 16% the following day.

It was then revealed that ImClone founder Samuel D. Waskal was also guilty of insider trading after he told his friends and family to sell off their stocks prior to the public FDA ruling (via SEC Commission). While Stewart was not originally implicated in the case, when investigators looked into Bacanovic’s involvement, her sales were discovered, leading to her highly publicized 2004 trial. Stewart maintained her innocence on the stand, but was found guilty.


Martha Stewart’s Sentencing & Where She Served Her Prison Time

Stewart Spent Her Incarceration In West Virginia

Stewart was indicted and put on trial in 2004, three years after her initial stock sales. She was found guilty of insider trading, and sentenced to five months in prison, five months of home confinement, and two years’ probation (via PEOPLE). Stewart was incarcerated at Alderson Federal Prison camp, which she once likened to a college campus where she learned to work with the other women inmates in harmony (via PEOPLE). The prison was located in a remote area of West Virginia. A friend of Stewart’s knitted her a poncho that she famously wore upon her release, when she told the mogul to “wear it good health” (via TODAY).


Following her five months in prison, Stewart remained on house arrest for an additional five months, and was only permitted to leave the home for emergencies, parole officer meetings, or medical appointments. At this point, Stewart was left to reckon with the state of her own company, Martha Stewart Living Omnimedia, which, prior to her arrest, printed the magazine Martha Stewart Living. Both Waskal of ImClone and Bacanovic were additionally sentenced to prison time for their respective roles in the insider trading case, serving seven years and five months, respectively (via SEC).


How Long Martha Stewart Was In Prison

Stewart Was Incarcerated For Five Months

Martha Stewart wearing a poncho she was gifted in prison

Martha Stewart was incarcerated at Alderson for five months amid primarily financial and non-violent criminals. The women’s only facility was not a maximum security prison due to the nature of Stewart’s crimes. The prison includes dormitory-style housing and a minimal security-to-inmate ratio (via Bureau of Prisons). The facility is often dubbed “America’s cushiest prison” for its campus-style functionality, educational opportunities, food, and minimal perimeter fencing (via Business Insider). On the contrary, maximum security prisons are often under high surveillance and contained in barbed wire fencing.


Alderson offers apprenticeships in several disciplines available to inmates, including welding, cooking, electricians, plumbing, teaching, and more (via Federal Prison Defense Attorney.com). The programs aim to begin the rehabilitation of inmates leading up to their eventual release from incarceration, setting them up for success. While Stewart requested kitchen duty, she was prohibited from doing so, instead tasked with cleaning, due to her already public persona as a lifestyle entrepreneur (via TODAY). Stewart remains an important figure in the American lifestyle world, mostly due to her idyllic home recipe ideas for the holiday season.

What Happened After Martha Stewart Was Released From Jail

Stewart Served Five Months On House Arrest And Remained On Probation For Two Years

Snoop Dogg and Martha Stewart


Following her release from Alderson, Stewart spent five months on house arrest and two years on probation. During this time, Stewart grappled with rehabilitating her reputation following her stint in prison. Stewart was determined not to be defined by her criminal record, and immediately returned to publishing Martha Stewart Living. She went on to release a line of ready-made home items with KMart following her 2005 release (via Variety).

She quickly returned to television the same year with The Martha Stewart Show, which ran on the Hallmark Channel from 2005-2012, when it was canceled due to rising production costs. Stewart additionally appeared on The Apprentice, a reality show once hosted by disgraced real estate mogul and former U.S. President Donald J. Trump. She later made a cameo appearance in Ugly Betty.


Stewart continued to collaborate with KB Home on a line of houses to be built initially in Cary, North Carolina (via KB Home). She then began to host a call-in radio show on Sirius XM, which is still running today since its 2005 inception. Stewart developed further houseware and craft lines with Macy’s and Walmart in the 2010s. Following the cancelation of The Martha Stewart Show, Stewart hosted Martha Bakes on Hallmark and Martha Stewart’s Cooking School on CBS.

Stewart achieved a new level of fame in 2016, when VH1 launched her cooking show with rapper Snoop Dogg, Martha & Snoop’s Potluck Dinner Party. The unlikely pair immediately garnered high ratings, and the duo remain close personal friends today. The show’s fusion of Stewart’s lifestyle brand and Snoop’s legendary ties to hip-hop culture resonated with a wide audience, cementing them in the cooking show pop culture zeitgest. Despite the setback of her prison time, Martha proves that Stewart’s journey remains ongoing, and that the mogul is always cooking up something fresh for audiences.


Sources: CNN, Investopedia, U.S. Securities and Exchange Commission, PEOPLE, TODAY, Bureau of Prisons, Business Insider, Federal Prison Defense Attorney, Variety, KB Home

Martha (2024) Poster

A documentary chronicling Martha Stewart’s evolution from Wall Street to influential icon, featuring candid interviews that explore her reinvention through the years.

Director
R.J. Cutler

Release Date
October 30, 2024

Cast
Martha Stewart

Character(s)
Self

Runtime
115 Minutes


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