Martha Stewart: Congress Dons Velvet Glove, Readies Iron Fist

08 August 2002

Martha Stewart, American media’s first lady of gracious home-making, has received a letter from supplicants appealing for her assistance.

‘So what’s new,’ you ask?

For starters, the letter is headed with the official indicia of the US House of Representatives and signed by the joint chairmen of its energy and commerce committee, Congressmen Billy Tauzin (Republican, Louisiana) and James Greenwood (Republican, Pennsylvania).

For seconds, the signatories opine that Stewart’s cooperation to date had not been “sufficient” and “hope and urge you to reconsider your position”. Or more specifically: withdraw her refusal to testify to the committee about her part in an alleged insider trading scam. [WAMN: 27-Jun-02].

The committee and federal authorities are investigating whether Stewart and other investors acted on inside information when they sold shares in biotechnology company ImClone, just one day before the company announced on December 28 that the Food and Drug Administration had rejected its cancer drug, Erbitux. Stewart and Peter Bacanovic, her broker at Merrill Lynch, are both friends of ImClone founder and ceo Samuel Waksal.

[Stop Press: Waksal was indicted on August 7 by a federal grand jury on charges of insider trading. He allegedly tried to sell his ImClone shares, and warned family members to sell theirs, prior to the company's announcement that the FDA wouldn't review Erbitux. The indictment also includes additional counts of perjury, obstruction of justice and bank fraud.]

The committee also wants additional information from Stewart, including emails relating to the matter and records of phone calls made by her personal business manager. Her continued refusal to play ball could lead to the intriguing possibility of Stewart – a byword for wholesome probity – receiving a subpoena to appear before the committee.

This would enhance her fragrant image not one jot – a thought that has struck at least one shareholder in the homemaking guru’s holding company, Martha Stewart Living Omnimedia. Conrad K Hahn has filed a lawsuit alleging she breached her duties to investors by allowing herself to get involved in the scandal.

According to court papers filed last week, Stewart “knows or should know that her corporation’s success is inextricably linked to her personal reputation for quality and integrity. Any actions taken by Stewart that reflect negatively on her will predictably have a negative effect on [her company].”

The home-making oracle not only dabbles in stocks to make an honest buck. She also fronts an award-winning magazine, Martha Stewart Living, an Emmy-accoladed TV program, a national radio show, a syndicated newspaper column, lends her name to mail order catalogs – and on alternate Tuesdays writes bestselling books.

Data sourced from: Multiple sources; additional content by WARC staff