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House Backs Justice Probe of Martha

WASHINGTON — Martha Stewart can’t seem to shake the feds.<br><br>On Tuesday, a congressional panel asked the Department of Justice to look into whether the chief executive officer of Martha Stewart Living Omnimedia deliberately lied or...

WASHINGTON — Martha Stewart can’t seem to shake the feds.

This story first appeared in the September 11, 2002 issue of WWD.  Subscribe Today.

On Tuesday, a congressional panel asked the Department of Justice to look into whether the chief executive officer of Martha Stewart Living Omnimedia deliberately lied or misled their investigators looking into the ImClone stock-dumping scandal.

According to the House Energy and Commerce Committee, Stewart’s version of events as to why and when she unloaded ImClone stock last December, provided through attorney letters, doesn’t match up to other information gleaned by the panel.

Stewart’s potential crime: violating the federal False Statements Act, a felony that carries a maximum prison sentence of five years for lying to or concealing from Congress material facts in connection with an investigation.

“This is serious business,” House Energy and Commerce Committee Chairman Billy Tauzin (R., La.), told reporters, describing how the panel’s concern over Stewart is less about allegations of ImClone insider trading and more about upholding the integrity of congressional inquiries.

Stewart has been investigated by the panel as part of its broader inquiry into the implications of how the Food and Drug Administration notifies companies whether their experimental drugs have been approved. ImClone chief executive officer and Stewart friend Samuel Waksal is facing federal insider trading charges for stock sales that occurred before it became public knowledge that the FDA rejected an ImClone cancer drug.

Until 2 p.m. Tuesday, committee lawyers made overtures to Stewart to testify before the committee to set the record straight. Her attorneys wrote the committee that if Stewart were subpoenaed, they would advise her not to speak. However, once the Justice Department and Congress are finished with their ImClone inquiry, the lawyers said, “she almost certainly would be available for testimony.”

Stewart, under scrutiny since January, has steadfastly denied any wrongdoing in the ImClone matter. A Justice spokesman said the agency hasn’t made a decision about whether to investigate Stewart.

In a letter to Attorney General John Ashcroft, the committee cited various discrepancies between Stewart’s version of events that she had a preexisting agreement with her broker, Peter Bacanovic, to sell her ImClone shares if they dipped below $60. In making its case, the panel used telephone records from Bacanovic and his assistant Douglas Faneuil, e-mails, media accounts and an affidavit from Stewart’s assistant, Ann E. Armstrong.

“This casts significant doubt on Ms. Stewart’s assertion that her decision to sell was based solely on some preexisting agreement with Mr. Bacanovic,” the committee wrote Ashcroft. However, the letter noted, “the committee has not reached any formal conclusion as to whether Ms. Stewart’s statements through her legal representatives to the committee would constitute a crime under federal law.”

Rep. James Greenwood (R., Pa.), chairman of the Investigations Subcommittee, was more pointed in his assessment: “She is a former stockbroker, she is a CEO of a major corporation. That is quite different from the average little investor sitting at home in their kitchen.”