America’s Homemaking Sweetheart: Criminal Probe Widens

27 June 2002

‘When America wants to learn how to make the perfect piecrust, grow an [sic] herb garden, create a beautiful flower arrangement, or fix a broken windowpane, it turns to Martha Stewart,’ gushes the intro to the home-making guru’s website.

Stewart, a latterday Mary Pickford, also fronts an award-winning magazine, Martha Stewart Living, an Emmy-accoladed TV program, a national radio show, a syndicated newspaper column – and in her spare time writes bestselling books. Plus: she hucksters a mail-order catalog and various product lines for the likes of KMart.

She also dabbles in the odd flutter on the stock market although advised, as she is, by Merrill Lynch, perhaps ‘dabble’ slightly underestimates the extent of her investment activity.

Which hobby has landed the homemaking heroine in a spot of bother: explaining to the satisfaction of federal prosecutors why she came to unload nearly 4,000 shares in ImClone Systems – a biotechnology company with a potential anti-cancer moneyspinner drug Erbitux – just one day before an announcement that the US Food and Drug Administration had refused to consider a licence application for the drug..

Apparently dissatisfied with Stewart’s explanation, the Feds have extended their insider trading probe to include possible obstruction of justice and making false statements. The investigation also involves others, notably Stewart’s friend Samuel Waksal, who happens to be ImClone’s chief executive, and who on June 12 was arrested and charged with insider trading. The Feds’ spotlight is also shining on Stewart’s broker at the Thundering Herd, Peter Bacanovic – who also handles brokerage business for Waksal.

The probe was widened earlier this week after Merrill employee, Douglas Faneuil, an assistant to Bacanovic, backtracked on his earlier support for the statement made to investigators by his boss and Ms Stewart: that he [Bacanovic] had a prearranged agreement with Stewart to sell the stock.

Faneuil, a 26-year-old sales clerk, now denies this, asserting (according to insiders) that he was not aware of any such arrangement and that he concocted his initial story after being leaned-on by Bacanovic.

Appearing Tuesday on CBS’ The Early Show, Stewart was ambushed by the show’s host Jane Clayson who asked the guru about the ImClone stock sale just as she was mixing a salad. Stewart replied that she wanted to “focus on my salad” – later volunteering that she would be “exonerated of any ridiculousness”.

‘Martha Stewart shares the creative principles and practical ideas that have made her America’s most trusted guide to stylish living,’ her website informs.

Data sourced from: The Wall Street Journal Online; additional content by WARC staff