Stewart's resignation marks a stunning fall from grace for a high-powered entrepreneur who last year was elected to a prestigious position on the board of the New York Stock Exchange.

Stewart, 62, will continue to serve as her company's chief creative officer. Her longtime No. 2, Sharon Patrick, becomes CEO. Jeffrey Ubben, whose investment firm owns 22 percent of the company's class A stock, becomes chairman.

The U.S. Attorney in Manhattan hit Stewart and her former broker with nine criminal counts, accusing them of conspiring to fool investigators.

The Securities and Exchange Commission filed separate civil charges against Stewart and her broker, accusing them of inside trading. The SEC will try to fine Stewart and bar her from acting as a company director and limit her role as an officer of her company.

On top of the obstruction of justice charges, which were expected, the criminal indictment alleges that Stewart committed securities fraud last June when she issued several statements claiming that there was nothing wrong with her ImClone stock sale.

Those statements, which prosecutors say were designed to shore up the stock price of Martha Stewart Living Omnimedia, could become Stewart's biggest headache.

If convicted of that charge, which carries a maximum sentence of 10 years, she would almost certainly end up in jail, owing to the fact that her statements swayed her company's stock price by millions of dollars. By contrast, her decision to sell her ImClone stock on Dec. 27, 2001 — a day before a negative decision from the Food and Drug Administration on the company's cancer drug sent the stock tumbling — spared her some $45,000 in losses. Stewart and broker Peter Bacanovic pleaded not guilty at their arraignment in federal district court here yesterday.

Stewart's lead attorney, Robert Morvillo, said his client would be fully exonerated. Bacanovic's lawyer, Richard Strassberg, proclaimed his client's innocence and accused regulators of picking on Stewart solely because of her "celebrity status."