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The case has been rumbling on for months, following a lengthy investigation into insider trading and the sale of around 4,000 shares in ImClone Systems.

Stewart sold the shares after being informed that the founder, a close friend Samuel Waksal, was selling his own stock in the company.

However, the investigation has focused less on the trade and more over how Stewart went to such lengths to lie to cover up the sale. She is accused of lying to the FBI and the US watchdog, the Securities & Exchange Commission.

As the charges were made, the board of directors of her company, Martha Stewart Living Omnimedia Inc, issued a statement saying that Stewart is to step down as chairman and CEO, but will continue to serve as founder and chief creative officer on the board.

In a statement, Stewart said: "I love this company, its people and everything it stands for and I am stepping aside as chairman and CEO because it is the right thing to do. This will enable the company to continue to build the confidence and love of its readers, viewers, customers and strategic partners, without the distraction of my personal legal issues."

The Martha Stewart company is behind the top-selling US magazine Martha Stewart Living, as well as various spin-off titles, TV shows, websites and syndicated columns, not to mention a range of Martha Stewart homewares sold in Kmart that complete the Stewart industry.

In court, Stewart pleaded not guilty to the charges in a federal district court in Manhattan and she proclaimed her innocence in an open letter published online and in USA Today.

"I simply returned a call from my stockbroker. The government's attempt to criminalize these actions makes no sense to me."

The indictment portrayed Stewart as going to extraordinary lengths to cover her tracks. It said she lied to investigators saying that her stockbroker had already agreed to sell the shares before she found out that ImClone's founder was stepping down.

She said she had told her stockbroker to sell the shares if they fell below a certain market value. The indictment alleges that she tampered with a phone message from the broker in her assistant's computer straight after talking to her lawyer. She knew was in serious trouble.

At a press conference yesterday, James Comey, the US attorney for the Southern District of New York, said: "This criminal case is about lying -- lying to the FBI, lying to the SEC, lying to investors."

He added: "Martha Stewart is being prosecuted not for who she is, but because of what she did."

On top of the federal case, there is a civil case lodged by the SEC, which centres on the illegal insider trading activity. Stewart's former broker Peter Bacanovic is also criminally indicted and has been named by the SEC in its investigation.

After leaving court, Stewart did not answer media questions, instead her lawyers issued a statement and said that they expected Stewart to be fully exonerated.

Stewart has consistently denied any wrongdoing in relation to the sale of stock in ImClone. On top of all of that, she could also face charges from angry investors.

However, in her message to shareholders, Stewart made it clear she would not be leaving the company and said that she felt an enormous sense of responsibility to the shareholders.

"I will continue to be instrumental in the company's creative efforts, across the entire Omnimedia spectrum, including all of our print and television products, working with our exceptional array of creative experts to develop the unique ideas and content that have defined our company and all of its brand labels since its inception," she said.

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