NEW YORK (CNN/Money) -
A Merrill Lynch sales assistant who handled the controversial sale of ImClone Systems stock by Martha Stewart in December is contradicting what the home design trendsetter and her broker have said about the trade, according to a published report.
Stewart, who sold nearly 4,000 ImClone shares the day before the Food and Drug Administration refused to review ImClone's cancer stock Erbitux, is being investigated on whether she had inside information before the FDA action. ImClone shares tumbled Dec. 28, the day after Stewart sold.
Martha Stewart Living Omnimedia (MSO: down $3.42 to $12.55, Research, Estimates) fell 21 percent Monday on the new report, as investors worried that her legal problems could hurt her consumer brands. Shares of ImClone (IMCL: up $0.22 to $8.92, Research, Estimates) were off about 3 percent.
Stewart and her broker, Peter Bacanovic, said that she had put a "stop-loss order" on her account to sell the shares of ImClone if the price dropped below $60, which it did the day of the sale. But the Wall Street Journal, quoting unnamed people it said have knowledge of the matter, said Bacanovic's sales assistant, Douglas Faneuil, has told investigators looking into the matter he had no knowledge of any stop-loss order when he executed the sale.
Bacanovic, who was also the broker for former ImClone CEO and Stewart friend Samuel Waksal, said Stewart's stop-loss order was a verbal agreement and that his notes back up her claim. The paper said that while some stop-loss orders at Merrill are never entered into the brokerage firm's computer system, Merrill officials believe that if a stop-loss order did actually exist, Faneuil would have known of its existence when he executed the sale.
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Merrill Lynch said Friday that both Bacanovic and Faneuil have been placed on paid leave pending further investigation of the sales of ImClone stock last December.
Waksal already has been charged with insider trading violations for allegedly alerting family members and trying to sell his own shares before the announcement about the FDA action.
Stock sale by Stewart pal probed
In further bad news for Stewart, Time magazine has learned that investigators now are looking into the sale of another 10,000 shares of ImClone stock by Dr. Bart Pasternak, a close friend of Stewart, at about the same time she made her sale.
Time reports that Stewart was traveling with Pasternak's estranged wife Mariana on Stewart's private jet when she called Bacanovic to sell her shares, and then tried to reach Waksal. Investigators are trying to determine if Mariana Pasternak called her estranged husband and told him to sell the shares.