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As does the CEO, so does the GC? That’s the claim in a recently amended suit against Martha Stewart Living Omnimedia and eight MSO executives, including General Counsel Gregory Blatt. The plaintiffs, all investors in MSO, maintain that Blatt, just like his boss, allegedly engaged in insider trading. They claim the GC dumped company stock last spring because he privately knew that CEO Stewart was under investigation for her sale of shares in ImClone Systems Inc. But Blatt says the charges are nonsense, and that his sale of MSO stock was made according to a plan set up before Stewart’s ImClone trade. The MSO investors originally brought suit in Manhattan federal court in August 2002, but filed an amended complaint this past February. The plaintiffs, represented by New York-based Milberg Weiss Bershad Hynes & Lerach, argue that their case has been bolstered with new statements from an unidentified former employee at MSO. The amended complaint states that according to this employee, “the government’s insider trading investigation into Stewart’s ImClone stock sale was well known to all of the individual defendants at the time of their MSO stock sales, and the adverse impact news of the investigation likely would have on MSO’s stock price was discussed between them.” IT’S ALL IN THE TIMING At first glance, the timing of Blatt’s stock sale raises just as many eyebrows as Stewart’s disposition of her ImClone shares. ImClone CEO Samuel Waksal has admitted that on Dec. 26, 2001, he learned the Food and Drug Administration would soon announce its rejection of Erbitux, ImClone’s prize drug for treating cancer. Stewart, a friend of Waksal’s, sold her stock in that company on Dec. 27. The FDA made its Erbitux decision public late on Dec. 28, and ImClone’s share price collapsed the next day. Stewart denies being tipped off by Waksal, and says that her stock was sold according to a previous arrangement with her broker. In January 2002 the government announced it was investigating Waksal. At the same time, it opened a probe into Stewart’s ImClone sale, but didn’t make this inquiry public until June. In March of 2002, Blatt exercised options on 5,000 shares of MSO stock, netting a profit of $75,250. (A look at publicly available insider trading data shows that Blatt has sold large blocks of company shares more or less annually since becoming GC in 1999.) In reply to repeated requests for comment, Blatt issued a one-sentence written statement: “We believe the lawsuit against the company is without foundation.” An MSO spokeswoman, responding to further questions, explained that Blatt’s March 2002 sale was made pursuant to a Rule 10b5-1 selling plan. Under such a plan, an executive’s company stock is sold automatically according to a pre-determined date or price trigger. Blatt’s 10b5-1 plan, which he implemented on Dec. 11, 2002, provided for his stock to be sold if MSO’s share price dropped to $18. Andrew Nussbaum, a partner at Wachtell, Lipton, Rosen & Katz who is Stewart’s personal outside counsel, has known Blatt since the mid-nineties, when the latter was an associate at Wachtell and worked on matters for Stewart. Blatt continued to handle matters for Stewart when he moved to Grubman Indursky & Schindler, a media and entertainment boutique firm, in 1997. Nussbaum speculates that Blatt got dragged into the Milberg Weiss suit because MSO’s small management team left the plaintiffs with few executive targets. The Wachtell partner says, “Based on my lengthy relationship with [Blatt], he has always conducted himself on a completely ethical [and] … superlegal level of integrity.” The suit has thrust Blatt into the spotlight, a situation he’s long tried to avoid. Unlike his famous boss, the GC has kept a low profile. A simple search on marthastewart.com, in fact, yields only one mention of Blatt: his recipe for Bloody Marys. Given his current worries, Blatt may need to make his drinks a bit stronger these days.

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