Martha Stewart resigns from company board of directors

NEW YORK -- Martha Stewart resigned Monday from the board and as chief creative officer of the media empire she built, a little more than a week after she was convicted of lying to federal investigators related to a 2001 stock sale.

The self-made queen of domestic arts will remain affiliated with Martha Stewart Living Omnimedia in a new role of founding editorial director.

In that role, Stewart, 62, will continue to provide creative inspiration for new product design and development; pen two pending books, "Homekeeping" and "Baking"; and provide input on the continuing evolution of the company and its brand and strategic issues.

Stewart will report to chief executive officer Sharon Patrick.

Stewart, who is the company's largest shareholder, had been expected to relinquish her board seat. Had she not stepped down, her departure from the board and any executive position would likely have been forced by the Securities and Exchange Commission, given that she is a convicted felon.

Stewart resigned as chairman last June, after she was indicted on charges related to her well-timed sale of stock in biotechnology company ImClone Systems Inc. in December 2001.

"Everyone at MSO recognizes the seriousness of Martha's situation and is deeply saddened," said Patrick in a statement. "However, all of us also believe that the company and our constituencies benefit most if we are able to continue to take advantage of Martha's creative inspiration and capitalize on her prodigious skills and experience in the domestic arts."

In a statement, Stewart said that Monday's action was "in the best interest" of the company.

"I am heartsick about my personal legal situation -- and deeply sorry for the pain and difficulties it has caused our employees," she said. "I look forward to continuing to collaborate on a wide range of creative ideas with the amazing, talented and hardworking people at this very special company."

The question remains how involved Stewart can be, since she will likely serve 10 to 16 months in prison, where there are restrictions on phone time and visitation. She'll also be required to work 35 to 40 hours per week at a menial prison job.

Stewart is scheduled to be sentenced in June.

Shares of Martha Stewart Living fell 43 cents, or more than 4 percent, to $9.90 on the New York Stock Exchange in afternoon trading Monday

Since Stewart's name was tied to the ImClone trading scandal 22 months ago, her multimedia company has seen its stock plummet 40 percent; and suffered from declining sales; financial losses and a defection from its advertisers.

Following the guilty verdict on four federal charges, the company suffered more blows. Her syndicated television show, "Martha Stewart Living," was dropped by Viacom; and The New York Times said two columns its syndicate distributes would be renamed, dropping any references to Stewart, and would be written by people other than the homemaking queen.

The company began moving away from Stewart's name a year ago with the launch of Everyday Food and is now testing another publication called "Organizing Good Things." But it remains heavily tied to her aesthetic values and her image.