Scrutiny Increases for Martha Stewart
The New York Times
June 14, 2002
By CONSTANCE L. HAYS
As Martha Stewart's friend Samuel D. Waksal refused to testify yesterday
before the Congressional committee investigating whether ImClone Systems
misled investors about regulators' attitude toward its application for the cancer drug Erbitux,
questions remained about the activities of Ms. Stewart. She has insisted that she did not
have any insider information before she sold nearly 4,000 shares of ImClone last December.
Congressional investigators are said to be seeking the records of the brokerage firm and telephone logs of Ms. Stewart, the
chairwoman and chief executive of Martha Stewart Living Omnimedia Inc. A spokeswoman for Ms. Stewart would not answer
questions about whether the records had been provided and said there would be no comment beyond a statement issued on
Wednesday, in which Ms. Stewart said she sold 3,928 shares of ImClone at $58 each, by prearrangement with her stockbroker,
and called Dr. Waksal afterward. "My transaction was entirely lawful," she said in the statement.
Ken Johnson, a spokesman for the House Energy and Commerce Committee that is holding hearings on the ImClone situation
in Washington this week, said in an interview that Dr. Waksal's brother, Harlan, testified yesterday that he did not know where
Samuel Waksal was on Dec. 27 but thought he was in his office. "We find it curious that Sam Waksal apparently was in his
office that Thursday, but didn't return phone calls to close friends like Martha Stewart," Mr. Johnson said.
He added that lawyers for Ms. Stewart have told the committee that she called Samuel Waksal before Dec. 25 to tell him she
would be spending Christmas in Mexico and left a telephone number where she could be reached. The call is shown on his
phone log, Mr. Johnson said. On Dec. 27, Mr. Johnson said, Ms. Stewart telephoned Samuel Waksal from San Antonio, where
her plane had stopped to refuel. That call, Mr. Johnson said, took place at 1:43 p.m. - the same time that Ms. Stewart's broker
executed the sale of her ImClone shares.
"We're trying to verify what time the trades were executed and what time the calls were made," Mr. Johnson said.
Her stockbroker, Peter Bacanovic of Merrill Lynch, referred requests for comment to the Merrill public relations office. A Merrill
spokesman said: "We do not discuss possible client relationships, nor do we comment on investigations except to say that we
cooperate fully with the proper authorities in all regulatory inquiries."
A spokesman for the New York Stock Exchange would neither confirm nor deny
a report in The New York Post yesterday that the exchange was investigating Ms. Stewart.
She was named a director of the Big Board last week, along with executives of
Autodesk Inc. and BlackRock Inc.
It would be unusual for the New York Stock Exchange to investigate trades made on another exchange. Shares of ImClone are traded on the Nasdaq.
As a director of the New York Stock Exchange, Ms. Stewart could be questioned about the propriety
of her ImClone stock sale, but a spokesman for the exchange would not say whether an inquiry
had begun.
A spokeswoman for the Securities and Exchange Commission, which often investigates stock trades, referred requests for
comment to a statement issued Wednesday, in which the commission announced that it had filed insider trading charges
against Samuel Waksal. The statement noted that "the commission's investigation is ongoing."
Shares of Martha Stewart Living Omnimedia continued to fall yesterday, closing down 20 cents, at $14.80, after unusually
heavy trading of nearly 1.7 million shares. Since June 6, when Congressional investigators said they were looking into her sale
of ImClone shares, the stock price of Ms. Stewart's company has dropped 22 percent.
Mr. Bacanovic has turned up in the society pages as frequently as Ms. Stewart, and occasionally by her side. A youthful first
vice president in Merrill Lynch's United States private client group, he has worked at Merrill for about nine years. He is
considered a philanthropist by some who know him, and he once told an acquaintance that he tried to give away 50 percent of
his salary.
"He is good looking, popular and well liked," said David Patrick Columbia, a columnist who has published beaming pictures of
Mr. Bacanovic at parties on his Web site, Newyorksocialdiary.com. "He is often invited to the most prominent affairs in New
York. He is on the A list when hostesses want to find a really attractive, fun, extra man."
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