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Martha's '$60' note raises questions
Document with handwritten notes is clearly not stop-loss order; Stewart nixes "Early Show" spot.
July 2, 2002: 6:52 PM EDT

NEW YORK (CNN/Money) - Congressional investigators believe that a note from Martha Stewart's broker, with the figure "$60" written on it, raises more questions than it answers, a spokesman for the House Energy and Commerce subcommittee told CNN/Money Tuesday.

The document, containing handwritten notes, is "clearly not a standard stop-loss order," spokesman Ken Johnson said. The note with the $60 figure -- a possible reference to the price at which Merrill Lynch broker Peter Bacanovic agreed to sell Stewart's shares of ImClone Systems stock -- was part of a number of documents turned over by Merrill Lynch last week.

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Johnson said that congressional investigators will continue to pore over the Merrill documents.

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A note turned over to investigators by Merrill Lynch in which Martha Stewart's broker wrote "$60" may not help clear Martha of insider trading charges.

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The House Energy and Commerce subcommittee on oversight and investigations, which is investigating the ImClone scandal, has yet to speak to Bacanovic. The Merrill broker, who was put on leave last month, must first answer any questions from the Department of Justice regarding the ImClone sale before he can speak to Congressional investigators, a source familiar with situation told CNN/Money.

But the panel is in talks with Bacanovic's attorney, Richard Strassberg.

"[Bacanovic] will either appear voluntarily or we will appear at his door with a subpoena," Johnson said.

Both Stewart and Bacanovic are under investigation for possible insider trading of ImClone (IMCL: Research, Estimates) stock. Stewart sold nearly 4,000 shares of the stock a day before ImClone announced its cancer drug application had been rejected by the Food and Drug Administration.

Stewart repeatedly has defended herself, saying she had an existing verbal agreement with Bacanovic to sell her ImClone shares if the price dipped below $60. Congressional investigators have been unable to find evidence of such an agreement.

Stewart, who has not been charged with any wrongdoing, has said she spoke to congressional investigators in January regarding the sale of ImClone stock. But since the ImClone scandal broke last month, the home-decor diva has not spoken to investigators.

But Congress may have further questions for Stewart, Johnson said.

"We have heard her side of the story and now we have to hear Bacanovic's," he said. "If either statement conflicts in any way then we will call her in."

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Congressional investigators claim the note, apparently written by Bacanovic, may not be enough to clear Stewart since an official "stop-loss" note hasn't turned up and Bacanovic's assistant, Douglas Faneuil, said one never existed, according to the Washington Post.

"It's a lot of odd little coincidences, in a best-case scenario. In a worst-case scenario, somebody will say this was just a made-up story," said Marcel Kahan, a securities law professor at New York University. "The question really is not whether she had the order; the question is whether she had inside information. She sold her shares at a very opportune time for her."

Separately, a spokeswoman for Stewart said she has canceled her regular Wednesday appearance on CBS's "The Early Show," after being pressed for details on the alleged insider trading last week. During last week's appearance, Stewart said she could not comment on the matter, saying only that she expected to be "exonerated of any ridiculousness.''

"CBS is a premier news network and, as such, they are compelled to interview Martha Stewart regarding the ImClone matter," the spokeswoman said. "As she explained in her previous interview on CBS last week, she is unable to comment or offer any other information at this time out of respect for the investigatory process. "

Last month, the Securities and Exchange Commission charged Stewart's friend, former ImClone CEO Sam Waksal, with insider trading, alleging that he alerted family members of the pending FDA rejection before the official announcement. Waksal also tried unsuccessfully to sell his own shares with two different brokers.

Bacanovic's lawyer, Strassberg, and a Merrill Lynch spokesman declined comment on the note or the case Tuesday.

Neither Stewart's lawyer nor her spokeswoman could immediately be reached for comment.  Top of page