Stewart expected to pay $5 million to settle suit

WASHINGTON — Martha Stewart Living Omnimedia Inc. said Wednesday that founder Martha Stewart was expected to pay about $5 million to settle a class-action lawsuit that alleged she lied about her sale of ImClone Systems Inc. shares in 2001.

The total settlement is expected to cost $30 million, of which the company expects to pay about $15 million, its insurers about $10 million and Stewart the rest, the company said in its quarterly report filed with the Securities and Exchange Commission.

The New York-based media company last month announced the pending settlement of the case but hadn’t disclosed Stewart’s share of the proposed payments.

Martha Stewart Living said that it started negotiating the settlement late last month but cautioned that the negotiation was continuing and the settlement remained subject to court approval.

The company also said in its quarterly report that it had advanced about $1.3 million to Stewart to cover her legal fees and expenses incurred in connection with the class-action suit.

Martha Stewart Living said that it paid similar advances for other defendants and that it had been reimbursed by its insurers for a majority of the advances.

Several lawsuits filed in 2002 and later consolidated alleged that the company, Stewart and other company officers made false and misleading statements about Stewart’s sale of 3,928 ImClone shares in December 2001.

Plaintiffs claimed that the statements artificially inflated Martha Stewart Living’s stock until the alleged falsity of the statements became public.

Stewart agreed this year to pay $195,000 and be banned from serving as a director of a public company for five years to settle SEC insider-trading charges.

Stewart was also convicted in March 2004 of lying to federal authorities about her sale of ImClone shares a day before a Food and Drug Administration announcement sent ImClone shares plummeting.

Shares of Martha Stewart Living rose 6 cents to $22.03.