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June 11, 2003

The Trouble with Martha
Stockbroker assistant pleads guilty to payoff
for silence on insider stock tip
By Thomas Hobbs, Assoc. Editor

     CLOVIS -- Martha Stewart has inspired women to elevate the ordinary. She has taught them 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
e-mail 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 thru Merrill Lynch 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 tells 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 if 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 per 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 Living stock.
     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) Opinion & Editorials
~Is Martha Stewart being persecuted? -- Chicago Tribune (Jun 10, 2003)
~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:


Dear Martha,
    My husband, 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 astounding.
    You are an inspiring example to millions of people of someone who aimed for...and reached..."the great American dream."
    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.

Sincerely yours,
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.]

Letter to the Editor

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