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Martha coming back as CEO?
Lawyers seek deal with SEC, which had sought to keep Stewart from the boardroom of her company.
February 28, 2005: 6:36 PM EST
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CNN's Rudi Bakhtiar takes a closer look at how the domestic diva will spend her next 5 months in home detention.
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NEW YORK (CNN) - Martha Stewart's attorneys may be able to negotiate a settlement with the Securities and Exchange Commission that would permit Stewart to return to the helm of Martha Stewart Living Omnimedia at some point, according to a person familiar with the situation.

"If she's living straight and narrow, will the public be at risk if she became CEO again?" this person said.

The SEC has filed an insider trading case against Martha Stewart, in which it is seeking to bar her from acting "as a director of, and limiting her activities as an officer of, any public company." That case is separate from the federal obstruction of justice charges for which Stewart is serving a five-month prison sentence. She is due to be released next week.

Federal prosecutors did not bring insider trading charges against her in their case. She is appealing her conviction on charges she lied about her sale of ImClone Systems stock before damaging information about the biotech firm became public, as well as for obstructing an investigation into the sale. Her SEC case is on hold while her criminal appeal proceeds.

Newsweek's online edition reported Wednesday evening that Robert Morvillo, Stewart's lawyer, recently opened the negotiations by asking officials in the SEC's New York office to consider a settlement on insider-trading charges. The magazine reported that SEC officials told her lawyers that it would consider a settlement deal that wouldn't require her to be barred for life from running her company.

Morvillo told CNN Thursday that he did expect there will eventually be a settlement in the SEC case, as is typical in cases brought by the agency. But he said there are no active settlement talks taking place.

The SEC also wants to fine Stewart and force her to give back losses she avoided through her sale of ImClone (Research) stock in the suit.

Stewart, who is still the controlling shareholder of her company, gave up her Chairman and CEO titles when she was indicted in 2003. She gave up her position on the board as well as her title of chief creative officer following her March 2004 conviction. She is now listed as the company's chief editorial and media director.

She has not been allowed to conduct business while in prison, but she will be allowed to be involved in business decisions after her release while she serves an additional five months of home detention.

There is no SEC rule stating that convicted felons may not be officers of public companies; merely a requirement that the conviction be disclosed if it could impact the company's stock.

The SEC had no comment.

Stewart's company Wednesday reported a fourth-quarter loss of 14 cents a share excluding special items, compared to a profit of 7 cents a share a year earlier, and projected a fiscal first-quarter loss of 35 cents a share on $38 million in revenues.

But shares of the company's stock still gained as the loss came in less than forecasts. The company also forecast improved second-quarter results, when Stewart is set to appear on a new syndicated daytime television show.

-- From Allan Chernoff, CNN Senior Correspondent  Top of page

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