Martha Broker Dealing/ Will squeal if given immunity, source says

New York Daily News ^ | 6/28/02 | TIMOTHY J. BURGER in Washington

[kattracks]

Let's make a deal.

Martha Stewart's stockbroker has approached prosecutors seeking immunity from charges if he tells them whether his A-list client lied to the FBI to cover up insider trading, said a source familiar with the investigation.

The broker, Peter Bacanovic, was put on administrative leave by Merrill Lynch last week after brokerage house lawyers discovered inconsistencies in his explanation about the sale of Stewart's ImClone Systems stock just before it collapsed.

Manhattan U.S. Attorney James Comey is investigating whether the princess of potpourri made false statements to investigators when she answered questions in April about why she sold her ImClone stock in the nick of time, sources said.

A source familiar with the investigation told the Daily News that Bacanovic has offered to help prosecutors but wants to make sure he won't have to face criminal charges.

Bacanovic could be charged with lying to the government, a felony, because he talked to the Securities and Exchange Commission during a lengthy deposition.

Stewart and Bacanovic at first told investigators she had a prearranged oral agreement to sell ImClone if it dropped below $60 per share.

But Bacanovic's assistant, Douglas Faneuil, contradicted their version of events, telling Merrill Lynch investigators there was no prior agreement, sources said.

Bacanovic's testimony could help corroborate Faneuil's statement to Merrill Lynch about Stewart's ImClone shares, said another source familiar with the matter.

After being suspended, Bacanovic hired lawyer Richard Strassberg, a former prosecutor from Comey's office who is now a defense attorney. Strassberg declined to comment yesterday.

Faneuil, whose statement was turned over to federal prosecutors, has hired a lawyer, Marc Powers. He and Stewart's lawyers did not return calls.

Deal With Congress?

Prosecutors have told congressional investigators looking into the ImClone stock sales that they are discussing possible deals with Bacanovic and Faneuil, and want Congress to delay a request to interview them.

"They want to get them first," a government source said.

Rep. Jim Greenwood (R-Pa.), chairman of the House energy and commerce subcommittee leading the probe, said yesterday that Faneuil and Bacanovic's lawyers "are not racing in here to see us with their clients."

"We're negotiating and they're recalcitrant, and sometime next week we'll decide whether we need to use our subpoena power or not," he said.

The subcommittee has not decided whether to call Stewart.

The lawmakers received boxes of information about the Stewart trade and several others from Merrill Lynch and have started reviewing them.

Most of the documents detail Bacanovic and Faneuil's activities in the days surrounding the Stewart trade, committee spokesman Ken Johnson said. "It's going to make for good bedtime reading," he said.

[kcvl]

Peter Bacanovic, left, and Martha Stewart attend a party in New York in December.

Awww...that just breaks my heart. lol!

[kcvl]

Friday, June 28, 2002

Investigators look at information contradicting Stewart's statements

WASHINGTON (AP) — Seemingly contradictory accounts of Martha Stewart's sale of ImClone stock and actions by a widening circle of her acquaintances are drawing the attention of congressional investigators.

The latest is a doctor who also sold shares of the biotech company shortly before the government announced it had rejected ImClone's approval application for the cancer drug Erbitux.

Stewart, who commands a multimedia empire and a profitable corporation, increasingly is under the glare of government scrutiny and tabloid attention -- bringing investor displeasure. Shares of her company, Martha Stewart Living Omnimedia, plunged 21.4 percent to finish at $12.55 Monday as questions about her ImClone stock sale continued to swirl. Omnimedia stock is traded on the New York Stock Exchange, of which Stewart recently became a director.

Shares of Stewart's company have been battered since June 6 -- they were trading at around $19 then -- when reports surfaced of the congressional investigation of her ImClone stock sale.

What Stewart, herself a former stock broker, and her now-suspended Merrill Lynch broker have said about the sale apparently clashes with the account of the broker's assistant.

The affair has supplanted Enron Corp. and other companies as the corporate scandal du jour:

-Former ImClone chief executive Samuel Waksal, a friend of Stewart, was arrested June 12 by FBI agents at his New York City apartment on charges of securities fraud and conspiracy. Waksal invoked the Fifth Amendment the next day at a House hearing and refused to answer lawmakers' questions.

-On Friday, Peter Bacanovic, the Merrill Lynch broker shared by Stewart, Waksal and Waksal's two daughters, and Bacanovic's assistant were suspended with pay by the brokerage firm for what it called "factual issues regarding a client transaction."

Investigators with the House Energy and Commerce Committee are examining whether Stewart had inside information when she sold nearly 4,000 shares of ImClone on Dec. 27, a day before the announcement that the Food and Drug Administration had decided not to consider Erbitux, an experimental drug for combating colorectal cancer.

Investigators say Stewart's telephone log shows Bacanovic called her on Dec. 27 and told her, according to her secretary's entry, that he "thinks ImClone is going to start trading downward."

But Ken Johnson, a spokesman for the House panel, said the stock had been declining for several weeks. "Why did Mr. Bacanovic call her on that particular day?" he asked.

Investigators want to know whether the call occurred before or after ImClone stock hit $60, the level at which Stewart has said she had a standing order with Bacanovic to sell her shares. Stewart also tried to reach Waksal that day.

The investigators also want to look at Bacanovic's client list to see whether others dumped ImClone stock before the FDA rejection became publicly known.

More broadly, federal prosecutors and the Securities and Exchange Commission have been investigating trading of ImClone stock by several people.

Stewart has said repeatedly that her trade was legal and based on information available to the public at the time.

Bacanovic's assistant at Merrill Lynch, Douglas Faneuil, who handled Stewart's ImClone sale, has given information to the company that appears to contradict what Stewart and Bacanovic maintain was the trigger for the sale.

They have said the stock was sold because of a previously arranged order to dump the shares when ImClone fell below $60. Such a "stop-loss" order, a common practice, would back up Stewart's position that she didn't trade on inside information. But recent statements from Faneuil to Merrill Lynch legal officials have cast doubt on whether such an order existed, The Wall Street Journal reported Monday.

There is another discrepancy: Bacanovic has said he and Stewart decided to put the stop-loss order in place on or after Dec. 10, while Stewart told the investigators it took effect in late November.

It turns out Stewart was not alone on the private jet she took from Connecticut to San Jose del Cabo, Mexico, on Dec. 27, the day of her stock sale. With her was Mariana Pasternak, the ex-wife of Bart Pasternak, the doctor who sold 10,000 ImClone shares the following day, before the company announced the FDA rejection.

Investigators have interviewed Pasternak and want to meet with Mariana Pasternak, Johnson said.

Bart Pasternak told The Associated Press on Saturday that he, his ex-wife and Stewart have done nothing wrong.

"We certainly did not do anything that is under investigation," he said. "Our friendship with Martha makes us the subject of questioning. I'm absolutely convinced she did nothing wrong."

[kcvl]

VAGUE CONVERSATION. Then there's the alleged discrepancy between when she said she made the request -- in late November -- and what broker Bacanovic recalls as a discussion that took place in December. Investigators argue that the latter date might have allowed her access to inside information. A Merrill sales assistant now is said to dispute the notion of any agreement, and says he misled company lawyers and the Securities & Exchange Commission by agreeing with his boss and his boss's high-profile client in saying that one existed. That raises the specter of obstruction-of-justice charges if Stewart is found to have lied.

So what is Stewart's reaction to the confusion? A woman known to plan every minute of every month and to pore over every plum she preserves, she can only point to a vague conversation with Bacanovic at some point in November. In one of the few opportunities to address the public, during her weekly stint on CBS's The Early Show on June 25, she brushed off questions from the host, saying she would be cleared of any "ridiculousness" and wanted to "focus on my salad."

The facts in the case plainly raise questions about Stewart's ethics. On the day that she sold her stock, Stewart admits to calling her pal Waksal from her private jet to demand an explanation for what was going on. Apparently, they never spoke. But as the head of a public company herself, not to mention a former stock broker, she should have known better than to seek out nonpublic information from the head of a company in which she invests. At the very least, the move suggests an undue sense of entitlement. Stewart maintains that she has done nothing improper.

CLUBBY APPEARANCE. Given her close relationship with Waksal, Stewart also had to know that Bacanovic handled trades for insiders at ImClone, which could place her broker in an advantageous -- and dangerous -- position as far as any tips regarding the stock were concerned. Yet we are to believe that she never pumped Bacanovic for information on the company, simply agreeing to sell while calling up her friend Waksal to pump him for information instead. That scenario doesn't sit well with one ex-Wall Street trader, an acquaintance of Bacanovic, who argues that "everyone in that circle passes tips to each other."

[Solid Oak]

This part of the Clinton legacy. Remember Hillary shorting drug company stocks and then publicly advocating that the government should engage itself in the price and distribution of drugs........stock prices went down and Hillary and her friends made a killing. NOTHING HAPPENED TO THEM! Bill gives false testimony....no presecution. They made a mockery out of justice. Now everybody wonders why other high rollers disregard our laws!

[Kobyashi1942]

Mark my words, this woman will never be brought to justice. She has way too much political clout.

[YaYa123]

Your headline is the original headline, which accompanies the article, but boy is it misleading!! It's Martha's stockbroker who wants to make a deal....not Martha.

Talk about screwed up headlines! And in this case, I have to wonder if it's intentional, ignorance, or both.

[DooDahhhh]

The role models (Clintons) of the Democrats!!!!!!!!

[YaYa123]

But of course, the name "Martha" had to be in the headlines.

"Martha Broker Dealing/ Will squeal if given immunity, source says"

is a lot sexier than "Peter Bacanovic Seeks Immunity"

[gov_bean_ counter]

A source familiar with the investigation told the Daily News that Bacanovic has offered to help prosecutors but wants to make sure he won't have to face criminal charges.

I am reminded of that line from Fried Green Tomatoes, "The secret is in the sauce". Be careful if Martha decides to invite you over for barbeque.

[11th Earl of Mar]

Martha just announced that her next cooking show will be entitled, "How to Cook a Squealing Pig."

[demkicker]

"Mark my words, this woman will never be brought to justice. She has way too much political clout."

I'm not so sure this time... There's too much of the little guy's blood in the water to let another elite go unpunished.

Besides, if continued lawlessness is allowed to go unpunished, the stock market will indeed go to hell. The Bush administration knows we are dangerously close to economic disaster. Those with political clout want to hold onto it and jumping to M.S.'s defense is too risky. The way I see it, the only ones stepping out to defend her will be the high priced defense attys she hires.

[Grampa Dave]

It appears that the lower rung Rats are getting ready to roll over and start devouring the feet and legs of the more elite Rats.

With luck this will go up the entire Rat power structure.

What a beautiful sight, Rats devouring each other to protect themselves. The squealing and rolling over and the cries of "I didn't know! I'm not Guilty!" while the Rats are devouring each other will make a great summer!

[Liz]

What a beautiful sight, Rats devouring each other to protect themselves. The squealing and rolling over and the cries of "I didn't know! I'm not Guilty!" while the Rats are devouring each other will make a great summer!

It's really, really nice to see this corrupt breed get their due.

[Biblebelter]

I could not agree with you more. The source and nature of her political clout is very interesting. Martha is a driven woman, some say ruthless. She will not allow the government to take her down without an intense fight. She will expose all the politicians who have done what she did and worse. I am thinking of Senator Torricelli who was involved with some questionable stock deals long before it became public that he liked to do transactions with envelopes stuffed with hard cash. If they even try to take down Martha, she will deal with these political slugs just like she would deal with the other kind of slugs that might try to foul her perfect gardens.

[Grampa Dave]

See my thread #13 above in this thread.

Martha is a perfect target. If she rolls over and her roll over takes out 2 or more really big elites, we win. She will lose a fortune in her own company, and no big company will want to advertise on her tv program and probably her magazine.

I could care less if she goes to jail. She will become a pariah in the elite Rat Colony of fascists that own and control corporations and donate big time to the Rat politicians. Martha has entered into Rat Living Hell for the rest of her life!

Every place she goes or any tv show she will appear on will be like a huge billboard to the Elite Rats. That billboard will just silently ask "Are you next?" to every Elite Rat who sees Martha for at least a decade.

[OKSooner]

Cellmates in Hell:

Martha Stewart and Jeff Smith, AKA "The Frugal Gourmet"...

[WaterDragon]

I don't mind seeing the Democrat donors being exposed. The Dems are simply corrupt, and have verrry close ties to corrupt citizens.

[L,TOWM]

>>>>>>The way I see it, the only ones stepping out to defend her will be the high priced defense attys she hires.<<<<<< <

And all the libertarians that seem to think the little dogs being devoured by the fattest dogs around is cool.

[Grampa Dave]

OS posted, "Cellmates in Hell, Martha Stewart and Jeff Smith, AKA "The Frugal Gourmet"...

Maybe Martha and Jeff can come up with 101 ways to cook and serve Rat with style and grace.