Investors sue Martha Stewart

AMERICAN style guru Martha Stewart came under renewed fire today after investors filed a class action claiming the tycoon knowingly dumped shares in her own Martha Stewart Omnimedia group before an investigation into her dealing in shares of biotechnology group ImClone became public.

The suit, filed in US District Court in Manhattan, claims Stewart and other executives sold 5.3 million shares of MSO worth about $80m (£55m) because they knew she would be investigated on suspicion of insider trading in the shares of ImClone and that it would hurt MSO's share price.

Since early June, when news surfaced that Stewart had sold shares in ImClone the day before it disclosed its new cancer drug had been rejected by US regulators, MSO shares have dropped 55%. News of the lawsuit sent the shares falling 61 cents to $8.30 today.

Stewart claims she had no inside knowledge of the government decision surrounding ImClone.

The suit seeks class-action status for any investor who brought shares of MSO from 8 January to 24 July. A judge will decide whether the suit has enough merit to proceed as a class action, when one group can sue on behalf of many. Such litigation is a nightmare for companies because it is usually expensive to defend.