Congress subpoenas Martha broker records
Congressional investigators want to know if broker Bacanovic called Stewart on Dec. 27.
July 8, 2002: 7:32 PM EDT

NEW YORK (CNN/Money) - Congressional investigators have subpoenaed the personal cell and home phone records of Peter Bacanovic, Martha Stewart's former stockbroker, a spokesman for the House Energy and Commerce told CNN/Money Monday.

Rep. Bill Tauzin (R-La.), chairman of the House Energy panel, issued the directive to obtain Bacanovic's records for the month of December, spokesman Ken Johnson said.

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Congressional investigators said they gave Bacanovic, a Merrill Lynch broker, every opportunity to provide the information voluntarily but continued to get the run-around from his attorney, Richard Strassberg.

"Right now he faces the choice of either turning over the records or running the risk of facing contempt of Congress charges," Johnson said.

Strassberg, Bacanovic's attorney, confirmed that he received the subpoena Monday but declined further comment.

Investigators with the House Energy and Commerce Committee want to know if Bacanovic called Stewart from his cell-phone on Dec. 27, 2001, and warned her to dump shares of ImClone Systems Inc.

Stewart sold about 4,000 shares of ImClone stock that day. On Dec. 28, the Food and Drug Administration told ImClone (IMCL: Research, Estimates) it would not approve the company's application for the would-be blockbuster anticancer drug Erbitux.

Stewart and Bacanovic repeatedly have denied any wrongdoing, saying they had a verbal agreement that Bacanovic would sell Stewart's shares of ImClone when they dropped below $60. Last week, investigators found a note with the figure "$60" on it but have yet to find any evidence of such an agreement.

In June, Merrill Lynch placed Bacanovic and his assistant Douglas Faneuil on paid leave. According to a report in the Wall Street Journal, Faneuil first confirmed there was a "stop-loss" agreement between Bacanovic and Stewart, but later changed his story.

Bacanovic had been previously unavailable to investigators because he was on a pre-arranged trip in London. But the Merrill broker is back in the United States, persons familiar with the situation told CNN/Money.

Former ImClone CEO Sam Waksal, a friend of Stewart, has been charged by the Justice Department and the Securities and Exchange Commission with tipping off family members to the FDA's action and helping them avoid stock losses.

It is illegal for corporate executives with knowledge of important facts about a company to buy or sell that company's stock or tell other people to do so without first making those important facts public.

Since Stewart's name has arisen in the scandal, shares of her company, Martha Stewart Living Omnimedia (MSO: Research, Estimates), have plunged, inflicting worse losses on Stewart than if she had waited until after Dec. 28 to sell her ImClone stock.  Top of page