ShareThis Page
Investigators look at information contradicting Stewart’s statements |

Investigators look at information contradicting Stewart’s statements

The Associated Press
| Tuesday, June 25, 2002 12:00 a.m

WASHINGTON (AP) — Congressional investigators are looking at new information that appears to contradict what Martha Stewart and her now-suspended broker have said about her sale of ImClone stock.

A House committee is interested in a widening circle of Stewart acquaintances. The latest is a doctor who also sold shares of the biotech company shortly before the government announced it had rejected ImClone’s approval application for the cancer drug Erbitux.

Stewart, who commands a multimedia empire and a profitable corporation, increasingly is under the glare of government scrutiny and tabloid attention — bringing investor displeasure. Shares of her company, Martha Stewart Living Omnimedia, plunged 21.4 percent to finish at $12.55 Monday as questions about her ImClone stock sale continued to swirl. Omnimedia stock is traded on the New York Stock Exchange, of which Stewart recently became a director.

Shares of Stewart’s company have been battered since June 6, when reports surfaced of the congressional investigation of her ImClone stock sale.

Former ImClone chief executive Samuel Waksal, a friend of Stewart, was arrested June 12 by FBI agents at his Manhattan apartment on charges of securities fraud and conspiracy. Waksal invoked the Fifth Amendment the next day at a House hearing.

On Friday, Peter Bacanovic, the Merrill Lynch broker shared by Stewart, Waksal and Waksal’s two daughters, and Bacanovic’s assistant were suspended with pay by the brokerage firm for what it called “factual issues regarding a client transaction.”

Investigators with the House Energy and Commerce Committee are examining whether Stewart had inside information when she sold nearly 4,000 shares of ImClone on Dec. 27, a day before the announcement that the Food and Drug Administration had decided not to consider Erbitux — an experimental drug that the company had touted as miraculous in combatting colorectal cancer.

The investigators also want to look at Bacanovic’s client list to see whether others dumped ImClone stock before the FDA rejection became publicly known.

More broadly, federal prosecutors and the Securities and Exchange Commission have been investigating possibly suspicious trading of ImClone stock by several people.

News of the FDA rejection brought a sell-off in ImClone shares. Stewart has repeatedly said that her trade was legal and based on information available to the public at the time.

Bacanovic’s assistant at Merrill Lynch, Douglas Faneuil — who handled Stewart’s ImClone sale — has given information to the firm that appears to contradict what Stewart and Bacanovic maintain was the trigger for the sale.

They have said the stock was sold because of a previously arranged order to dump the shares when ImClone fell below $60. Such a “stop-loss” order, a common practice, would back up Stewart’s position that she didn’t trade on inside information. But recent statements from Faneuil to Merrill Lynch legal officials have cast doubt on whether such an order existed, The Wall Street Journal reported Monday.

The congressional investigators are setting up interviews with Bacanovic and Faneuil for later this week, said Ken Johnson, a spokesman for the House panel.

There is another discrepancy that has made them question whether Stewart had a stop-loss order on the stock: Bacanovic has said he and Stewart decided to put it in place on or after Dec. 10, while Stewart told the investigators it took effect in late November.

It turns out Stewart was not alone on the private jet she took from Connecticut to San Jose del Cabo, Mexico, on Dec. 27, the day of her stock sale. With her was Mariana Pasternak, the ex-wife of Bart Pasternak, the doctor who sold 10,000 ImClone shares the following day, before the company announced the FDA rejection.

The investigators have interviewed Pasternak and want to meet with Mariana Pasternak, Johnson said.

In what he called “another one of those strange coincidences” in the ImClone affair, Johnson noted that Bacanovic had worked at ImClone in the early 1990s.

Bart Pasternak told The Associated Press Saturday that he, his ex-wife and Stewart have done nothing wrong.

“We certainly did not do anything that is under investigation,” he said. “Our friendship with Martha makes us the subject of questioning. I’m absolutely convinced she did nothing wrong.”

Categories: News
TribLIVE commenting policy

You are solely responsible for your comments and by using you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.