Congress Is Off Martha's Case

Lawmakers asked the Justice Department on Tuesday to begin a criminal investigation into whether Martha Stewart knowingly lied to a House committee examining whether she received inside information before selling her ImClone stock.

Rep. Billy Tauzin R-La. says "It is with disappointment we announce obviously that we have come to the end of the road in regard to the matter dealing with Martha Stewart."

In a letter to the justice department, Congress did forward what it called "specific and credible information in our possession that could suggest a federal crime has been committed."

But Congress is off the case.

Christopher Byron, author of "Martha, Inc.", told CBS News Correspondent Anthony Mason that he believes the investigation is over.

"I think if there was something here I think this committee would have run with it and stayed with it. And they didn't."

Wall Street seemed to think so too. Stock in "Martha Stewart Living Omnimedia", which plummeted during the investigation, jumped nearly 17% after the announcement.

And while the reputation of the home decorating diva may have been damaged, brand strategy consultant Lori Kapner says the Martha Stewart brand may not be, "If you bought her sheets and you love her sheets, you'd buy them again, regardless of what happened. Would I want Martha to start up a new company now offering stock advice? No, I wouldn't suggest that."

Stewart's company has already been moving to distance itself from it's founder. The Martha Stewart Living magazine, for example, no longer has her picture on the cover.

Byron says, "It's really kinda been the big vulnerability of this company from day one: What happens if Martha Stewart gets hit by a truck? And this is the functional equivalent of maybe a very near miss at the corner."

The Justice Department is still probing the ImClone insider trading case. And Martha Stewart remains part of that investigation. But her running public battle with Congress is over.

"As members of Congress we believe it our obligation to forward specific and credible information in our possession that could suggest a federal crime has been committed," members of the House Energy and Commerce Committee said in a letter to Attorney General John Ashcroft. The letter was signed by Republican and Democratic leaders of the panel.

The lawmakers said they have been prevented from resolving discrepancies and "suspicious communications" surrounding the stock sale because Stewart has repeatedly refused to be interviewed by the committee staff and because her attorneys have said she would invoke her Fifth Amendment right if subpoenaed.

In the letter, the committee said the investigation of Stewart was warranted because of questions about possible "misbehavior by corporate insiders" and because she is a prominent public figure who heads a publicly traded company.

The request for Justice Department action was announced at a news conference by Tauzin, chairman of the committee and Rep. Jim Greenwood, R-Pa., chairman of the panel's investigative subcommittee.

The letter cites the False Statements Act, which makes it a felony for anyone to "knowingly and willfully make any materially false statement" in an investigation by Congress. The penalty is up to five years in prison and a fine.

According to CBS News.com Legal Analyst Andrew Cohen, the investigation is now where it ought to be, away from Congress and into the realm of the law and the courts.

"When you hear a phrase like 'could suggest a federal crime has been committed' which is what was in this letter from Congress to the Attorney General," explains Cohen, "it means that Stewart's investigators in the House haven't come up with the goods on her but want their prosecution counterparts to continue the effort."

Cohen says, "This is not the best news in the world for Stewart -- that would have been a message from the House Committee that it is giving up its investigation without having found a thing. But," Cohen adds, "it's also not the worst news she could have heard -- that would have been a formal referral to the Justice Department."

Earlier Tuesday, a Democratic member of the panel, Rep. Peter Deutsch, D-Fla., said Congress should focus more on the kinds of institutional problems that led to the Enron collapse and stop pursuing the Martha Stewart trading investigation.

"My recommendation for the last several weeks has been that we process and give the information to the Justice Department, whose job it is to investigate and prosecute individual criminal offends," said Deutsch. "Ours is to deal with systemic issues in the country and system issues in the market, which we have not done yet."

"My recommendation for the last several weeks was that we process and give the information (on Stewart) to the Justice Department," Deutsch said.

"The thing we're not very good at is investigating and prosecuting," the Florida Democrat said on CBS's "The Early Show." He said "our job is to deal with systemic issues in the country," such as preventing such collapses and protecting workers' 401(k) and other pension programs.

Stewart has steadfastly maintained that she told her Merrill Lynch broker to dispose of the stock if it dropped below $60 per share. The committee has been seeking to clear up discrepancies between her account of the sale and those of her now-suspended broker and his assistant.

Lawmakers have been trying to determine whether Stewart, before her stock sale, had information that the FDA was going to reject the drug. The company's stock subsequently plummeted. Questions have remained despite an earlier letter from Stewart's lawyers denying she had received any notice of the FDA's decision, according to the committee.

Johnson also said phone records obtained by the committee appear to contradict statements by former ImClone president and Stewart friend Sam Waksal that he did not speak to her or her agents between Dec. 14 and Jan. 5, as well as Stewart's assertion that Waksal did not return a call she made to him during that period.

Waksal is the only person who has been charged in the federal investigation of ImClone Systems Inc., which he founded. He pleaded innocent last month to charges of securities fraud, perjury, bank fraud and obstruction of justice.