June 11, 2003
Trouble with Martha
assistant pleads guilty to payoff
silence on insider stock tip
Thomas Hobbs, Assoc. Editor
CLOVIS -- Martha
Stewart has inspired women to elevate the ordinary. She has taught
to pay attention to details. She has motivated them to pursue interests
with passion. She is strong, creative and a successful woman.
This emotion and commitment to Martha
is typical of the thousands of
letters she receives
at her web site following the hearing on an indictment for
fraud. The Indictment in
this matter shows the following undisputed time-line:
(A) 12-27-01 -- Sam
Waksal, ImClone Chairman and Martha Stewart's personal adviser,
is informed that his company is going broke. He immediately sells
all his ImClone stock
broker, Doug Faneuil. Then phones Faneuil's boss, Pete Bacanovic.
Bacanovic then phones Martha Stewart, but does not reach her.
So, he then
leaves a message on Stewart's answering machine alerting her to
the information he obtained from Waksal that "ImClone is
going to start trading downward." Later, same day, Stewart,
hearing of the Waksal 'sell-order' from Faneuil, calls back. Faneuil
her to sell her 3,928 shares of stock in ImClone.
(B) 01-09-01 -- On first day of stock trading after ImClone reveals
that the FDA has rejected ImClone's application for Erbitux,
a new experimental cancer treating drug, the company's dropped 18%
from $55.25 to $45.39 a share.
(C) 01-07-02 -- Bacanovic informs the SEC that Stewart told him
in a Dec. 20, 2002 phone call that she wanted to sell ImClone
it dropped below $60 per share. Baconovic also states that he took
the Dec. 27th sale order for Stewart.
(D) 01-30-02 --Bacanovic turns an altered work-sheet in to his
manager with the notation, "@60" made in blue ink, scientifically
distinguishable from the ink used on the rest of the page.
(E) 01-30-02 -- Stewart alters her phone log, changing Bacanovic's
12-27-02 message to a less incriminating one [Peter
Bacanovic re: ImClone]. She later restored the original message.
(F) 02-04-02 -- After speaking with Bacanovic on her cell phone,
Stewart tells investigators she had an agreement with her broker
to sell ImClone at the $60 designated price. She says she had no
knowledge of the Waksal sale when she phoned-in her sell order.
She says she did not know that federal authorities had questioned
her broker. She says she "...did not have a clue."
(G) 02-12-02 -- Stewart calls Bacanovic's office several times
from her cell phone.
(H) 02-13-02 -- Under oath, Bacanovic tells the Securities &
Exchange Corp., that his notes from a talk with Stewart indicate
that she planned to sell ImClone shares if it fell below $60
share. Bacanovic says he hasn't spoken with her about the sale
since that date.
Worse yet, for Martha Stewart, on 08-05-2002
a stockholder in Martha Stewart Living Omnimedia Inc. filed
a lawsuit against the homemaker, alleging she damaged the reputation
of her company by becoming involved in the recent ImClone Systems
insider trading scandal.
Conrad Hahn, who filed the lawsuit, seeks unspecified
damages for potential loss of revenue because of the plunge in Stewart
The stock is currently trading at $8.15
a share, down from $20.93 in mid-March. Stewart, an Imclone investor
and friend of ex-CEO Samuel Waksal, sold nearly 4,000 shares in
the company the day before the U.S. Food and Drug Administration
(FDA) announced that it would not approve the company's cancer drug
Erbitux. Waksal was arrested on June 12 on insider trading charges.
Since the 2002 time line, the following
news headlines have been appended to her file:
~Martha Stewart Mug Shot, Fingerprints Taken Quietly
-- Reuters (Jun 10, 2003)
~Civil suit against Stewart may break new ground -- Chicago Tribune
(Jun 10, 2003)
~Supporters Flood Martha Stewart Web Site -- AP (Jun 10, 2003)
~Is Martha Stewart being persecuted? -- Chicago Tribune (Jun 10,
~Why They're Picking on Martha -- Time Magazine (Jun 10, 2003)
~Martha Stewart: the indictment of an American icon -- World Socialist
Web Site (Jun 10, 2003)
~07-09-03 -- Lucy Hartman Letter to Martha Stewart:
Gary, and I want you to know we think you are TERRIFIC. We appreciate
the way you have passed on traditions. It has benefited citizens
in this country and many others in innumerable ways.
We enjoy listening to your pleasant speaking
voice. You are an exceptionally talented teacher. You have brought
back dignity and respect for those who keep the homes and gardens
of the world.
We admire your intellectual and emotional
intelligence and business acumen. We like to watch you showcase
the talents of other talented people and learn from them. The respectful
way you treat your mother is exemplary.
We can't think of ANYONE in this country
or abroad who has worked harder than you. We admire your vision,
energy, imagination and the way you reach high goals for yourself
and your businesses. The range of your interests and knowledge is
You are an inspiring example to millions
of people of someone who aimed for...and reached..."the great
We support you in thoughts and prayers in
this unfortunate situation/court battle. We are saddened by this
attack on you and we feel you are the target of people who are jealous
and lack common sense.
We can't understand why our courts waste
so much time and money persecuting our highest achievers, like you
and Bill Gates. It is counter-productive, to say the least.
Gary & Lucy Hartman
[EDITOR'S NOTE: Martha Stewart
gave a speech at an investors' conference on
June 19, 2002, just a week after ImClone Chairman Waksal was
arrested on fraud charges. Stewart stated
her sale of ImClone shares was perfectly legal, and she was cooperating "...fully
and to the best of my ability with investigators." Now,
Federal Prosecutors allege that she lied to investors in order
to pump up the stock price of her company.]
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