Shares of Martha Stewart Living Omnimedia Inc. (MSO) slumped to an historic low Monday as concerns about Martha Stewart's links to an insider trading probe were stoked by the suspension of her stockbroker by Merrill Lynch.

Stewart, the home design and decorating diva, has been under intense scrutiny for selling nearly 4,000 shares of ImClone Systems Inc. (IMCL) on Dec. 27, just one day before the U.S. Food and Drug Administration rejected the biotech company's experimental cancer treatment.

Martha Stewart shares fell as much as $4.10, or 26 percent, to $11.87 in heavy trading on the New York Stock Exchange, reaching their lowest point since going public in late 1999, before recovering slightly in the late afternoon. The stock, the NYSE's biggest loser for the day, closed down $3.42, or 21 percent, at $12.55.

Martha Stewart's stock price has dropped about 34 percent since Stewart's ImClone trades were uncovered on June 6, when it closed at $19.01.

Analysts said the stock was down because Peter Bacanovic, Stewart's stockbroker, and Douglas Faneuil, a sales associate, were placed on administrative leave by Merrill Lynch & Co. Friday. Faneuil has provided information that led the brokerage to doubt that a stop-loss order, which Stewart claims was previously arranged, ever existed, according to the Wall Street Journal.

The House committee probing the ImClone case hopes to interview Bacanovic and Faneuil within the next week, according to Ken Johnson, a spokesman for House Energy and Commerce Committee Chairman Billy Tauzin, a Louisiana Republican.

LACK OF WRITTEN ORDER SEEN AS 'PECULIAR'

Committee investigators have sought a copy of the stop-loss order and were told by Stewart's attorneys and Merrill Lynch that the agreement was verbal, Johnson said.

"Frankly we found that peculiar. You either have a stop-loss order or you don't. There should be some documentation of it, even if it was verbal," Johnson said.

CONTINUED FLOW OF BAD NEWS

The continued flow of bad news has overshadowed Martha Stewart Living Omnimedia's strong performance, said Davenport & Co. analyst George Smith. The company said last week it expects to meet earnings estimates in the second quarter on strong ad sales.

"Investor confidence is more important than consumer confidence right now, especially in this market," said Smith.

Stewart has been romantically linked to Sam Waksal, the former chief executive of ImClone, who was arrested June 12 and charged with conspiracy, securities fraud and perjury involving an alleged insider trading scheme in ImClone shares.

Stewart has repeatedly denied any wrongdoing, saying in a statement she had no inside information and did not speak to Waksal before selling her ImClone shares. She said she made an agreement with her broker to sell the shares when they fell below $60.

Additionally, congressional investigators have interviewed Dr. Bart Pasternak, the ex-husband of a close friend of Stewart, about his sale of 10,000 ImClone shares on the day of the FDA rejection, said Johnson. Mariana Pasternak reportedly flew to Mexico with Stewart the day before his trade was made.

Dr. Pasternak denied wrongdoing, and said he has been divorced from his wife for nine years, and has not had a conversation with Martha Stewart for five years -- "with the exception of saying 'hi' at a parties we both happened to attend."

Analysts also said continued uncertainty about Martha Stewart's stock price should be expected.

"The stock's going to be volatile until the investigation is resolved. We're waiting to make the final investment judgment until all the facts are in," said Adams, Harkness & Hill analyst Jon Fox.