HAYS JUNE 5, Martha Stewart was indicted yesterday on charges of conspiracy, obstruction of justice and securities fraud, all linked to a personal stock trade she made in She pleaded not guilty and pledged to fight the charges. Hours after her arraignment in federal district court in Manhattan, the media and merchandising company she founded, Martha Stewart Living Omnimedia, announced that she was stepping down as chairwoman and chief executive.

She will continue as a director and is expected to remain a force as the company's ''chief creative officer. The indictment depicted Ms. Stewart as going out of her way to conceal the circumstances of the sale of nearly 4, shares of ImClone Systems, a transaction that investigators say she made after learning that her friend, Samuel D. Waksal, the company's founder, and his daughter were selling their own stock.

Indeed, the charges focused less on the trade than on an elaborate cover-up that prosecutors say came afterward. According to the indictment, Ms. Stewart lied to investigators by telling them that she and her stockbroker had previously agreed to sell the shares if their market value fell below a certain price, and altered a phone message from the broker in her assistant's computer ''immediately following a lengthy conversation with her attorney.

PROSECUTING MARTHA STEWART: THE OVERVIEW; Martha Stewart Indicted by U.S. On Obstruction - The New York Times

At a news conference announcing the charges against Ms. Comey, the United States attorney for the Southern District of New York, said, ''This criminal case is about lying -- lying to the F. A separate civil complaint from the Securities and Exchange Commission accused her of insider trading, based on information she is said to have received from Douglas Faneuil, assistant to the stockbroker, Peter Bacanovic. Bacanovic, no longer Ms.

Stewart's broker, was also indicted yesterday on criminal charges, including perjury, and is named in the S. He pleaded not guilty to the criminal charges.

Stewart seemed composed as she entered a federal courtroom yesterday afternoon, flanked by lawyers and wearing a beige pantsuit. The judge, Miriam G. Cedarbaum, released both her and Mr.

Bacanovic without bail, although Mr. Bacanovic was ordered to surrender his passport. Bacanovic's lawyer, Richard M. Strassberg, said, ''We are confident he will be fully vindicated at trial. If convicted on all the charges, Ms. Stewart could face several years in prison and the possibility of a steep fine.

The ImClone Insider Trading Case: What did Martha Really Do?

A recent Justice Department directive discourages assigning white-collar offenders to house arrest. After her arraignment, she did not speak to reporters and photographers massed outside the courthouse in the rain. But her lawyers issued a statement saying she was being made ''the subject of a criminal test case designed to further expand the already unrecognizable boundaries of the federal securities laws,'' and they predicted that she would be ''fully exonerated.

Stewart has vigorously defended her sale of ImClone stock as ''entirely lawful'' and promised to fight the charges. But she faces an uphill battle.

In addition to the civil and criminal cases against her, several groups of investors in Martha Stewart Living Omnimedia are suing her over her conduct.

Comey said he used ''my discretion'' in deciding not to bring insider trading charges against Ms.

Stewart and her broker. He said case law would support such charges, but he called them ''unprecedented. Stewart should have known she was receiving illegal information when Mr. Faneuil told her the Waksals were selling their ImClone shares. It is seeking to have her barred from serving as a director of any public company, including her own, and to limit any executive role in a company.

We allege that she knew or recklessly disregarded that, and traded on that information. View all New York Times newsletters. The indictment, returned early yesterday by a Manhattan grand jury, describes a series of meetings between Ms. Stewart and investigators from the S. It lists various statements she made that prosecutors contend were false, and details meetings and phone conversations she had with Mr.

Bacanovic before each of them was questioned. A blue pen figured prominently in the case against Mr. Prosecutors contend that some time after January, when he learned about the S. Bacanovic scribbled the notation '' 60'' on a worksheet that listed Ms. Stewart's ImClone holdings and carried some comments that were written in blue ink on Dec. Stewart of securities fraud, the indictment, referring to her company by its initials, pointed to three statements she or her lawyer made proclaiming her innocence once her ImClone sale became widely known, it said, ''in an effort to stop or at least slow the steady erosion of MSLO's stock price caused by investor concerns.

One of the statements was made to a reporter for The Wall Street Journal on June 6, , and published the next day. The statement said Ms.

Stewart found guilty on all counts in obstruction trial - Mar. 10,

Stewart's ImClone trade was ''executed because Ms. Stewart had a predetermined price at which she planned to sell the stock. Another statement, issued on June 12, also said that an existing agreement led to the stock sale. But the indictment asserted, ''Stewart falsely stated that she 'did not have any nonpublic information' regarding ImClone when she sold her ImClone shares. Since the investigation became widely known a year ago, the company's business has declined in every division, from television to publishing and product sales.

Stewart indicated the beginning of a turnaround. Patrick, the president, will succeed Ms. Stewart as chief executive.

Jeffrey Ubben, whose Value Act Capital Partners invested in Ms. Stewart's company shortly before the news of her ImClone trade emerged, will be chairman. Comey called the indictments ''a tragedy'' for the company and its employees. Lying is an act with profound consequences. Tell us what you think.

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