The annoucement came hours after Stewart was indicted in a Manhattan federal court on charges of securities fraud, obstruction of justice, conspiracy and making false statements lodged against her by federal investigators.
She entered not guilty pleas to all of the counts of the indictment.
Stewart, the multi-millionaire icon of tasteful living, was indicted Wednesday by a federal grand jury for lying to investigators and investors about her sale of stock. The grand jury indictment was 41 pages in length.
Her broker, Peter Bacanovic, was charged with perjury and obstruction of justice, among other charges.
Stewart was also targeted by a civil complaint by the Securities and Exchange Commission.
"This criminal case is about lying: lying to the FBI, lying to the SEC and lying to investors," said U.S. Attorney James Comey. "That is conduct that will not be tolerated by anyone."
"Martha Stewart is being prosecuted not because of who she is but because of what she did," he said at an early afternoon press conference.
In a statement issued to question the government's motive for the charges filed against Stewart, her lawyers Robert G. Morvillo and John J. Tigue wrote:
"Is it for publicity purposes because Martha Stewart is a celebrity? ... Is it because the government would like to be able to define securities fraud as whatever it wants it to be? Or is it because the Department of Justice is attempting to divert the public's attention from its failure to charge the politically connected managers of Enron and WorldCom who may have fleeced the public out of billions of dollars?"
Neither Stewart not Bacanovic was charged with criminal insider trading. Comey said a charge of that type under these circumstances would be "unprecedented" because it involves a person outside the company in question, ImClone.
When Stewart arrived at the federal courthouse in Manhattan just before noon, she breezed past a crowd of reporters and camera crews without a word. Stewart's chief attorney Robert Morvillo said at that time that if indicted, she would "declare her innocence and proceed to trial."
The indictment came a day after Stewart's company, Martha Stewart Living Omnimedia, issued a statement saying Stewart's personal lawyers believed federal prosecutors would pursue criminal charges soon.
The scandal surrounds Stewart's sale of 4,000 shares of biotech drug maker ImClone Systems Inc. on Dec. 27, 2001 — the day before the government issued a disappointing report on ImClone, sending its stock price tumbling.
Federal prosecutors in Manhattan and the Securities and Exchange Commission have been looking into whether Stewart had advance word of the news. She is friends with ImClone founder Samuel Waksal.
Stewart, 61, has denied wrongdoing in the ImClone stock sale. She claimed to have had an arrangement with her broker for the automatic sale of the stock when it dropped to a certain price.
But Bacanovic was "charged with providing a bogus document to investigators," namely a worksheet that he claimed contained instructions given by Stewart to sell her stock once the price dipped below $60 a share.
While much of the document was genuine, Comey alleges that those instructions were only added after the investigation started. He claims B used a different blue pen to add the instructions after the original document was completed.
According to Comey, Stewart is charged with lying to officials from the U.S. attorney's office, the FBI and the Securities and Exchange commission during two interviews as well as "endeavoring to obstruct justice" for the first four months of 2002.
She is also charged with securities fraud for making "repeated, detailed and fraudulent explanations" for her sale of the ImClone stock to stockholders of her own company. This had the effect, Comey said, of defrauding those investors.
The SEC complaint against Stewart seeks to force Stewart to disgorge profits from stock sales and ban her from being an officer in any public company.
CBSNews.com Legal Analyst Andrew Cohen said the government's strategy seems to be to keep things as simple as possible.
"The indictment itself, and the way it was portrayed by federal prosecutors Wednesday, strongly suggest that the Stewart trial, if there ever is one, will hardly be a complex securities-law-driven affair. Instead, we were told by U.S. Attorney James Comey, the case will focus upon '"lying,'" writes Cohen.
"This is no accident. The Clinton impeachment scandal educated a lot of potential jurors about what obstruction of justice and perjury and false statements mean and ought to mean. And, in part because of this unsolicited education about process-oriented crimes, prosecutors know that it would probably be a lot easier to walk into court and prove that Stewart is a liar instead of trying to prove that she is a thief," Cohen writes.
"By emphasizing the cover-up, then, and de-emphasizing the trade, the feds are keeping their storyline clear and simple and easy to follow; a case of black and white in an area of the law -- securities -- that's often quite gray," says Cohen.
The scandal has dogged Stewart for more than a year. An attempt at reaching a settlement fell through.
Shares of her company, Martha Stewart Living Omnimedia, have fallen from $19 to just over $9. Stewart told The New Yorker magazine in January she has lost about $400 million because of the company's declining value, legal fees and lost business opportunities.
The company includes magazines, a television show, newspaper columns, Internet marketing and the Martha Stewart Everyday line of home products. Stewart was a contributor to CBS News' The Early Show until last summer and CBS parent Viacom syndicates her television show.
The company reported sales of $295 million last year. Analysts have said an indictment could further damage the company.
Taking a look at the potential impact of Stewart's indictment on her company CBS News Correspondent Mika Brzezinski spoke with several finance gurus for predictions.
Experts say Stewart's company will now have to decide how much they need the Martha Stewart name. And whether to stick out the investigation, hoping that she is vindicated, Brzezinski reports.
Another strategy would be to slowly separate the product from the name and bring in other stars. But in this case, that could be extremely hard to do, the marketers said.
ImClone founder Waksal will be sentenced next week after pleading guilty to six counts in the insider-trading scandal. He could get to six to seven years in prison, plus fines. Although he has not implicated Stewart, he has admitted he tipped off his daughter, Aliza, to sell her ImClone stock before it plummeted.
Stewart's sale of ImClone stock came one day before the Food and Drug Administration said it would not review ImClone's application for approval of Erbitux, which the company had touted as a promising cancer drug.
Just this week, a new study was released concluding that Erbitux was effective against cancer after all. ImClone stock rose sharply.