Hi Jeff,
Martha's is indeed an interesting story. I have found myself following it for some time now, and have reached some conclusions, presuming that the meager details that have appeared in news reports (thus far) are accurate.
There are some revelations that would point towards an a priori conviction on insider trading allegations. But close examination of these revelations shows a lot of "circumstantial evidence", and very little in the way of a "smoking gun". What appears to be prima facia at the outset soon becomes merely unsubstantiated allegations. As such, I now think that (with smart legal advisors on her side) Martha wins any case that the Feds try to make on insider trading charges.
At best, they can allege that Martha knew that Sam Waksal (and maybe other insiders) was selling, but the Feds have (to the best of my knowledge) no proof that she knew or could even accurately guess why Waksal was selling on that particular day in December. Knowing that the Waksal family was selling their ImClone stock is not in and of itself confidential insider information. Martha would have had to have had knowledge of why Waksal was selling, either by having received the information from a third party (or the company or Waksal), or she would have had to have been in a position where she could have reasonably guessed why Waksal was selling. My gut feeling here is that the Feds cannot prove insider trading occurred. Yes, there's a lot of smoke, and yes, it surely does walk like a duck, but I clearly feel that (to date) there's simply a lack of evidence anywhere to prove conclusively charges of insider trading. Even if the Feds were successful in convincing a judge or a jury that she knew or should have known the facts surrounding the insider trading activities of Waksal, they (the Feds) would also have to prove that Martha knew that the information came from the inside and that she knowingly traded on the information (intent). I just don't think that they can prove the intent or the knowledge.
Now, given that insider trading charges are extremely iffy at best, what they can do is examine Martha's statements to see if there is anything to support charges of obstruction of justice, which is a much more serious allegation.
And therein lies the rub. Martha (and her legal team) stick to the story that she intended to sell if and when ImClone stock dropped below $60 per share. She also stated that there was a prior arrangement with the broker (Peter Bacanovic, of Merrill Lynch) to sell at (or under) $60 per share and that the arrangement was no secret. However, Bacanovic's assistant at Merrill Lynch (Douglas Faneuil) has submitted testimony (under a plea bargain) that directly refutes any prior arrangement to sell, and no stop loss order for ImClone exists in Martha's account. So, either Faneuil's statement to the Feds is inaccurate or Martha's statements are inaccurate. Taken together, the testimonials are completely conflicting.
And in addition to the above, When Martha was in San Antonio (refueling the private jet along the way to Cabo San Lucas) and had talked with someone at a Merrill Lynch telephone number, her testimony clearly states that she conversed with Bacanovic, which was impossible, because (unknown to Martha at the time) Bacanovic was on vacation in Florida. Indeed, Faneuil's statement indicates that Martha talked directly to him, not Bacanovic. This would constitute inconsistency #2 in any Fed case of obstruction of justice, and lends some credence to the insider trading charges... (The prosecution's case would be something along the lines of "If she lied about this, and she lied about that, then why wouldn't she lie about what she knew about ImClone?".)
There's also a bit of information that I haven't seen repeated recently, so maybe the information is incorrect or has already been discredited or dismissed. Supposedly, someone accompanying Martha on the Cabo trip (presumably Mariana Pasternak, the real-estate broker) was tipped (presumably by Martha) and this other person then called her husband (or ex-husband), a dentist if I recall correctly, back in Westport(?) and he also sold whatever ImClone shares he may have held. Again, to repeat, don't take this additional information as the Gospel, because it came out originally shortly after the scandal broke, and proper investigation may have already discredited it or revealed it to be incorrect. But if it's true, then the Feds may indeed have established a chain of events, and may indeed have their smoking gun for both insider trading charges and obstruction of justice charges. We'll have to wait and see.
My own guess is that there is some sort of plea bargaining going on right now between Martha's legal team and the Feds. I think that Martha's lawyers are worried about the obstruction of justice charges, but are fairly confident they can beat the insider trading allegations. However, obstruction of justice penalties can be much more severe. So, my thinking is that if Martha would plead no contest (not an admission of guilt, nor an establishment of innocence) to insider trading charges, and disgorge profits plus penalties, then the Feds would drop the obstruction of justice investigation and close the case on Martha. No jail time and everyone walks away from the mess with something. Remember, the Feds already nailed Waksal (and apparently some of his family members) and Faneuil.
At least that's how I foresee the outcome. As always, I could be wrong.
KJC |
