Congress Hands Martha Stewart Case to Justice Department

12 September 2002

The probe into the share-dealing activities of America’s homemaking queen Martha Stewart has been passed to the Justice Department after the congressional investigating committee found evidence contradicting her version of events.

At the centre of the scandal is Stewart’s sale of 4000 shares in biotechnology firm ImClone on December 27 last year, just a day before the Food and Drug Administration announced it would not approve the company’s cancer treatment. What makes the transaction suspicious is that she happens to be a close friend of ImClone ceo Samuel Waksal, recently indicted for insider trading [WAMN: 08-Aug-02].

Stewart – whose fortune is built on advising America on all things wholesome and homely – denies accusations that she was warned in advance to dump the stock, claiming she had an arrangement with her broker, Peter Bacanovic, to sell should the price drop below $60 (€61.77; £38.71) a share.

However, in a blow to Stewart’s squeaky clean reputation, Representative Billy Tauzin (Republican, Louisiana) revealed that “other evidence obtained by the committee casts substantial doubt on the truth of her representations.”

For example, no record of any arrangement between Stewart and Bacanovic to sell the shares was uncovered in an internal investigation by the latter’s employer, Merrill Lynch. Tauzin, chairman of the committee, warned that she could be sent to jail for up to five years if she lied.

The congressional team wanted the homemaking oracle to appear before them to try to resolve the differing accounts, but Stewart’s lawyers said she would take the Fifth Amendment and refuse to testify.

The committee has therefore decided to hand its findings to the Justice Department, which has been conducting an investigation of its own into the affair. “As members of Congress,” Tauzin continued, “we believe it is our obligation to forward specific and credible information in our possession that could suggest a federal crime has been committed.”

The Justice Department has the power to launch criminal proceedings against Stewart, though it is still far from clear that this will happen.

Data sourced from: New York Times; additional content by WARC staff