Why did Martha Stewart go to prison? She opens up in new doc about insider trading scandal

Martha Stewart has been known for decades as the queen of home decor, crafting and cooking — and more recently, she’s expanded her following thanks to her unlikely friendship with Snoop Dogg and her thirst trap selfies.

In the early 2000s, however, Stewart made headlines for something very different — an insider trading scandal that landed her in federal prison for five months.

Stewart, 83, did not mince words about her time in prison in a trailer for her upcoming documentary, “Martha,” out on Netflix Oct. 30.

“It was so horrifying to me that I had to go through that — to be a trophy for these idiots in the U.S. attorney’s office,” she said. She later said, “Those prosecutors should have been put in a Cuisinart and turned on high.”

Stewart said she had to “climb out a hole” after her time in prison. 

There’s no doubt she hit the ground running after her release, returning to her magazine, Martha Stewart Living, and launching “The Martha Stewart Show” and “The Apprentice: Martha Stewart,” both in 2005.

Over the past two decades, she has worked on a dizzying number of projects.

She’s released several cookbooks and TV shows, including VH1’s “Martha & Snoop’s Potluck Dinner Party” and HGTV’s “Martha Knows Best,” and she has been involved in multiple entrepreneurial ventures, including launching a product line at Macy’s and, more recently, introducing her own brand of CBD wellness gummies. She recently said on TODAY with Hoda & Jenna that her 100th book would be an autobiography.

In the documentary, Stewart said she is grateful her life has not followed a conventional path.

“The cookie cutter house and the cookie cutter life was not for me,” she said in the trailer.

“I could’ve just been a miserable has-been housewife,” she also said. “But I didn’t let that happen to myself and I’m so happy I didn’t.”

Keep reading to learn more about one chapter of Stewart’s life, her time in prison following her insider trading scandal.

Why did Martha Stewart go to prison?

In June 2003, the U.S. Securities and Exchange Commission filed a complaint against Stewart and her broker, Peter Bacanovic.

The SEC alleged that Stewart had engaged in illegal insider trading two years earlier when she sold off all her stocks in a biopharmaceutical company, ImClone.

According to the complaint, Bacanovic tipped off Stewart when ImClone CEO Sam Waksal and his daughter Aliza Waksal placed orders to sell their ImClone shares, a sign that the company’s share price was about to drop. The Waksals’ decision to sell stock was not public information, per the SEC complaint. 

By calling Stewart to let her know about the Waksals’ sale, Bacanovic violated his employer Merrill Lynch’s insider trading policies and the Insider Trading and Securities Fraud Enforcement Act of 1988, per the SEC complaint.

Acting on this information, Stewart sold all of her nearly 4,000 shares of ImClone, and in doing avoided losses of about $45,000, according to the SEC.

The complaint also alleged that Stewart and Bacanovic lied on “multiple occasions” to authorities about what they had done and attempted to conceal their illegal actions.

“Stewart lied when she stated she had no recollection of Bacanovic telling her that any of the Waksals were selling their ImClone shares, and Bacanovic lied when he stated that he did not tell Stewart that Waksal was selling his ImClone shares,” the complaint reads.

According to the SEC, Stewart tampered with a piece of evidence, editing the contents of an incriminating message regarding her ImClone insider trading.

Stewart and Bacanovic pleaded not guilty. 

After a six-week trial, Stewart was found guilty in March 2004 on four counts: conspiracy, obstruction, and two counts of making false statements, according to the Associated Press.

She was sentenced that September to serve five months at Alderson Federal Prison Camp, a minimum-security women’s prison in West Virginia that housed about 1,000 inmates at the time, per a release from the Federal Bureau of Prisons.

Bacanovic was also found guilty of those four charges plus perjury for lying under oath to the SEC. He was also sentenced to five months in prison.

Stewart reported to prison in October 2004 and was released in March 2005. She then spent two years in supervised release, five months of which were spent in home confinement, according to a release from the Federal Bureau of Prisons.

Under the terms of her home confinement, Stewart was allowed to leave her house in Westchester County for 48 hours per week for work purposes, according to NBC News. She was also required to wear an ankle bracelet.

In April 2005, a judge denied Stewart’s request to end her five months of house arrest early, or to expand the time she was allowed to leave her home for work to 80 hours per week.

“Home detention is imposed as an alternative to imprisonment. It is designed to be confining,” Judge Miriam Goldman Cedarbaum wrote, according to the Associated Press. “I see no reason to modify the sentence.

Stewart and Bacanovic later pursued an appeal to overturn their sentences, but in January 2006, a federal appeals court upheld their convictions, per NBC News.

What has Stewart said about her time in prison?Stewart opened up about her time behind bars in a 2017 interview on Katie Couric’s podcast, calling being in prison a “very, very awful thing.”

“It was horrifying, and no one — no one — should have to go through that kind of indignity, really, except for murderers, and there are a few other categories,” Stewart told the former TODAY anchor.

“That you can make lemons out of lemonade? What hurts you makes you stronger? No. None of those adages fit at all. It’s a horrible experience,” she continued.

That’s not to say Stewart has erased all traces of her time in prison. She once revealed she kept a memento from her incarceration, a poncho that a fellow inmate crocheted for her.

She wore the poncho the day she was released from prison, and she later showed off the crocheted item during her first day back at work at Martha Stewart Living in 2005. 

“This was made by a friend of mine, a wonderful lady,” she said as she showed her employees the poncho, according to the New York Times. “The yarn came from the commissary. The night before I left, she handed me this — not wrapped, because there is no wrapping paper — and she said, ‘Wear it in good health.’”

Stewart told People in 2020 that she still has the poncho in her attic.

The lifestyle guru also owned her time in prison with a tongue-in-cheek product drop in 2021. In a TikTok video, she revealed she was selling an exact replica of a nativity scene she had crafted in a pottery class while “away at camp.”

“If you’d like to give a really beautiful and special gift this Christmas with a little street cred, they’re all inspired by — guess what — a set I made when I was confined,” she said in the video.

For extra authenticity, she noted that the nativity set pieces had her inmate number emblazoned on the bottom.