Word: stewart
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Once again, Stewart has chosen to fight, but this time more than her image is at stake. If she is found guilty of all the criminal charges, Stewart could face 25 years in prison, $2 million in fines and permanent damage to the company that bears her name and fortune. (She owns 61% of the stock, worth $310 million.) In addition to criminal charges, she faces a civil case brought by the Securities and Exchange Commission (SEC), alleging insider trading. Stewart's lawyers say she "has done nothing wrong" and has become a celebrity scapegoat for more egregious, if less...
...Department of Justice and the SEC have been investigating Stewart since early January 2002, just days after she sold about $228,000 of ImClone stock. It was a decision she made grudgingly, according to testimony given to the SEC by Stewart's broker at Merrill Lynch, Peter Bacanovic, because it meant admitting she was wrong. Bacanovic said he and Stewart had reviewed her entire portfolio in a pre-Christmas session of tax planning and disagreed about what to do with her 3,928 shares of ImClone. "She wanted to hold the stock, and I challenged that by saying, 'The stock...
Prosecutors contend that the $60 stop-loss agreement was a false alibi concocted by Stewart and Bacanovic to explain the events of Dec. 27, 2001. Stewart was on her way to a vacation in Mexico, and Bacanovic--then off on his own holiday--had just learned that ImClone co-founder Sam Waksal wanted to sell all the ImClone shares in his Merrill Lynch account, worth $4.9 million. Bacanovic called Stewart's assistant and left the message "Peter Bacanovic thinks ImClone is going to start trading downward...
...Stewart simply sold on that advice, securities experts say, she probably would not have faced trouble--though Bacanovic might have. But after hearing about Waksal's order, Stewart, ever the micromanager, tried to reach Waksal herself, leaving a message recorded as "Martha Stewart. Something is going on with ImClone and she wants to know what." Although Stewart didn't learn the reason for Waksal's attempted sale--he had been told that the Food and Drug Administration was about to reject an application for approval of ImClone's key drug, Erbitux--she sold her shares and avoided losses...
Insider trading, however, is not the focus of the criminal charges against Stewart and Bacanovic--that is left to the civil charges brought by the SEC. Several defense attorneys and former prosecutors say it would be difficult to make a criminal insider-trading case against the pair because the government would have to prove that Stewart knew the significance of Waksal's sale when she sold the stock. "It's a tricky case," says Greg Markel, a securities-law specialist at Cadwalader Wickersham & Taft in New York City. A broker passing along a tip from one client to another...