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Congress wants more Martha documents
Broker's assistant casts doubt on her story; Martha asks for delay of congressional interview.
August 7, 2002: 10:20 AM EDT
By Luisa Beltran, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Congressional investigators sought more documents from Martha Stewart Tuesday after an assistant to Merrill Lynch stockbroker Peter Bacanovic disputed her explanation for why she sold ImClone Systems stock last December.

Separately, Congressional committees probing the ImClone (IMCL: Research, Estimates) stock sale said that Stewart is refusing to talk to them. But Stewart's lawyer said the investigators had not responded to his request to delay an interview.

"We have been informed that on advice of your counsel you will not agree to be interviewed by the committee at this time under any condition," Rep. Billy Tauzin, R-La., and Rep. James Greenwood, R-Pa., said in a letter to Stewart's attorneys. "We sincerely hope and urge you to reconsider your position.

Tauzin is head of the House Energy and Commerce Committee while Greenwood leads the House Subcommittee on Oversight and Investigations. The House Energy and Commerce Committee has been trying to broker a meeting with Stewart for the last several weeks, spokesman Ken Johnson said.

Stewart is being investigated as to whether she benefited from inside information when she sold nearly 4,000 shares of ImClone a day before the Food and Drug Administration refused to review the biotech company's application for its cancer drug, Erbitux, last December.

Stewart, a friend of former ImClone CEO Sam Waksal, has repeatedly said she did nothing wrong and that she had a verbal agreement with Bacanovic, who was her broker at Merrill, to sell the ImClone shares if the price dipped below $60. However, congressional investigators have yet to find written evidence of that pact.

Stewart's attorney, Jeff Smith, said late Tuesday that the committee may have misunderstood them last week and that he had told investigators that a Stewart interview would be premature.

Smith, of the Washington law firm Arnold & Porter, in a letter asked to delay the meeting with investigators because they were not informed "about any theories" the committee had regarding Stewart's conduct.

"We requested that the committee defer its request for a staff interview at least until after the August recess or until such time as we were better informed," Smith said. "We never received a response to this letter."

The two panels also asked Stewart for more information about her sale of ImClone shares to clear up discrepancies regarding the pre-existing pact with Bacanovic and whether one actually existed, the letter said.

The records being sought include communications, including e-mail, Stewart sent to or received from any individual related to ImClone, Waksal or Stewart's Merrill Lynch securities account for the period Dec. 1 to Jan 9. The panels also want all telephone numbers held by Stewart or her business manager, Heidi DeLuca, for that time period. DeLuca was also asked to supply all records relating to ImClone for the period Sept. 1 to Jan 9.

The congressional panels set an Aug. 20 deadline to receive the information. The House Energy and Commerce Committee has already received Bacanovic's personal phone and cell phone records for the month of December.

He said, she said

The investigation into the Stewart's sale of ImClone Systems stock took another twist Tuesday. Douglas Faneuil, the assistant to Bacanovic, is now casting doubt on home style guru's explanation for selling the stock late last year.

Faneuil told Stewart late last year that ImClone CEO Sam Waksal and members of his family were selling large amounts of the company's stock, a person familiar with the situation told CNN/Money.

Faneuil also recommended that Stewart sell her ImClone shares, but the domesticity diva was not told of the Food and Drug Administration's decision not to review ImClone's cancer drug application, according to this person, who asked not to be named.

Bacanovic was also the broker for ImClone co-founder Waksal and his daughter, Aliza, as well as for Stewart. Merrill placed both Bacanovic and his assistant, Faneuil, on paid leave in June.

House investigators say they have a sworn statement from Stewart's assistant that contradict's Faneuil. The assistant, Ann Armstrong, says in the affidavit that it was Bacanovic that actually called the home-making diva, not Faneuil, Johnson said.

But congressional investigators have yet to find any phone records showing that either called, Johnson said. "If Miss Stewart has been truthful, as her lawyers insist, then why won't she tell her story to us under oath?" Johnson said.

The House panel will subpoena Stewart if necessary to get the information it needs. "The committee is going to get the truth out and won't let Stewart's tactics stop them," Johnson said.

Marc Powers, Faneuil's attorney, declined comment, as did a Merrill Lynch spokesman and a spokeswoman for Richard Strassberg, the attorney for Bacanovic.

Merrill assistant ordered to tell Stewart?

Bacanovic ordered Faneuil to tell Stewart that Waksal and his family were selling ImClone shares, according to published reports Tuesday.

Faneuil told prosecutors that he objected, but that Bacanovic insisted he tell Stewart that Waksal was selling large amounts of ImClone stock, the New York Times reported, citing a person familiar with the situation. He also told them that Stewart's explanation about a pre-existing arrangement was made up, the newspaper said. Phone logs kept by Stewart's office show that Bacanovic called that day, presumably alerting her that the price of ImClone was likely to drop, the paper reported.

Since questions arose about Stewart's involvement with ImClone and Waksal, shares of her company, Martha Stewart Living Omnimedia (MSO: down $0.55 to $7.62, Research, Estimates), have suffered. The stock, which is down nearly 60 percent, rebounded slightly Tuesday. The company admitted last month that the insider trading scandal has hurt its business.

Meanwhile, federal prosecutors have already charged Waksal with violating securities laws by tipping off relatives to sell their ImClone shares and trying to sell his own stock before the FDA's Dec. 28 announcement that it would not review ImClone's application for Erbitux. Waksal is currently negotiating a deal with prosecutors.

Separately, shareholders filed suit against Stewart and Martha Stewart Living Omnimedia in federal court in Manhattan Tuesday, alleging the homestyle guru misled investors about her sale of ImClone stock, Reuters reported. The shareholder lawsuit, which seeks class-action status, follows a lawsuit last week from investor Conrad Hahn who alleged Stewart breached her fiduciary duty to investors when she allowed herself to be linked to the ImClone insider trading scandal.  Top of page


--CNNfn's Scott Spoerry contributed to this report




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.