Martha Stewart probe may widen; stock falls©Associated Press
June 27, 2002
NEW YORK -- Shares of Martha Stewart Living Omnimedia Inc. tumbled nearly 24 percent Wednesday, fueled by reports that the decorating maven may be facing a wider investigation of her sale of ImClone Systems Inc. shares, including possible charges of obstruction of justice and making false statements.
Shares of the multimedia company fell $3.20 to $10.40 each on the New York Stock Exchange. The stock has fallen about 45 percent since news broke this month that Stewart's sale of stock in the biotech company was under scrutiny in an insider trading investigation.
At the heart of the matter now is whether Stewart, who is chairwoman and chief executive of her multimedia company and sits on the board of the NYSE, misled prosecutors in explaining why she sold almost 4,000 shares on Dec. 27. That was a day before the Food and Drug Administration announced that it would not consider Erbitux, ImClone's experimental cancer drug. Shares of ImClone subsequently plummeted.
Stewart is a friend of former ImClone CEO Sam Waksal, who was arrested two weeks ago on charges of insider trading for allegedly trying to sell his stock and tipping off family members after learning of the impending FDA decision.
The Wall Street Journal reported Wednesday that an assistant to Stewart's stockbroker had changed his initial version of the transaction. The sales assistant, Douglas Faneuil, acknowledged that he misled the brokerage firm's lawyers and the Securities and Exchange Commission when he supported the claim that Stewart and Peter Bacanovic had a prearranged sales agreement to dump the shares when they fell below $60.
Bacanovic is the broker for Waksal and his daughter Aliza, as well as Stewart.
In repeated public statements, Stewart has pinned her innocence to the existence of this agreement, which she said was done verbally. She has insisted the trade was lawful and done based on public information.
A call Wednesday by the Associated Press to Stewart's publicist was not immediately returned. In an appearance Tuesday on CBS' Early Show, she said: "I think this will all be resolved in the very near future and I will be exonerated."
According to the Journal report, Faneuil said he created his story after being pressured by Bacanovic, and now says he was unaware of the agreement.
Faneuil is expected to be interviewed by representatives of the U.S. Attorney's office in Manhattan, the newspaper said.
On Friday, Merrill Lynch announced that it had put Bacanovic and Faneuil on paid leave after an internal investigation, citing discrepancies in their accounts.
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