Shares of Martha Stewart Living Omnimedia Inc. (MSO) fell sharply Wednesday on concerns about Martha Stewart's personal involvement with the the former head of ImClone Systems Inc. (IMCL), who was arrested on insider trading charges, analysts said.

Stewart, the home design and decorating diva, sold 3,928 shares of ImClone the day before the company's experimental cancer drug was rejected by the Food and Drug Administration, which sent ImClone's stock into a nosedive.

Sam Waksal, ImClone's former chief executive, was arrested on Wednesday and charged with conspiracy, securities fraud and perjury involving an alleged insider trading scheme in ImClone shares. 

Stewart, a former girlfriend of Waksal, has previously denied any wrongdoing when she sold her ImClone shares on Dec. 27. She said after the market closed on Wednesday that her stake in ImClone was sold as the company's share price had dipped below $60. Her shares were sold at $58, she said. 

"I did not speak to Dr. Samuel Waksal regarding my sale, and did not have any nonpublic information regarding ImClone when I sold my ImClone shares," Stewart said. 

Wall Street analysts said Stewart's proximity to the insider trading case shook investors, pressuring the stock to its lowest level since mid-January. Since her ImClone stock sales were first reported late last week, shares of Martha Stewart have fallen nearly 21 percent. 

In heavy trading, the stock closed down $2.10, or more than 12 percent, at $15, and was among the biggest percentage losers on the New York Stock Exchange. In after hours Instinet trading, Martha Stewart shares rose 36 cents in light volume. 

ImClone shares rose 3.7 percent to $7.83 on Wednesday, after being down for most of the Nasdaq session. 

The stock was hurt by "concerns related to Martha Stewart's dealings with ImClone," said George Smith, an analyst at Davenport & Co. 

The importance of Martha Stewart and her image to her company cannot be overstated, analysts said. Any link to a criminal proceeding could have lingering effects. 

"If this becomes an issue that spreads beyond Barron's and The Wall Street Journal to People, Time magazine and Saturday Night Live, that could have a real impact," Smith said. 

Brean Murray & Co. analyst Kathleen Heaney said shares of the company fell last week when the news of the trades came out." "There's no reason they wouldn't also fall when [Waksal] was arrested," she said. 

Stewart appeared Wednesday afternoon at an investor conference in New York, but made no mention then of Waksal's arrest. 

Her remarks at the U.S. Bancorp Piper Jaffray consumer conference focused on plans for new magazine ideas. She took no questions from the audience and left immediately following her presentation. 

The charges against Waksal allege he learned the FDA was preparing to reject his company's drug, and passed that information on to members of his family, allowing them to sell shares before the setback became public.