The case against US homemaking and media queen Martha Stewart, implicated in an insider-dealing scandal, looks stronger than ever after an assistant to her stockbroker admitted misleading investigators to back up her story.
Douglas Faneuil, a junior employee at Merrill Lynch, pleaded guilty to a misdemeanour charge of accepting gifts such as an airline ticket and extra holiday in return for keeping quiet.
The scandal involves the sale by Stewart and others of shares in biotechnology firm ImClone on December 27 2001, just one day before the Food and Drug Administration announced it would not approve the company’s cancer treatment.
Prosecutors are uncertain whether the alleged tip-off to Stewart came from her friend and ImClone chief Sam Waksal, who was indicted in August for telling family members to dump shares in the firm, or her broker Peter Bacanovic, Faneuil’s boss.
However, they assert that on December 27 Bacanovic told Stewart, referred to as the “tippee”, that Waksal was selling all his shares. “The tippee,” they claim in court papers, “then sold all of the tippee's shares of ImClone stock, approximately 3,928 shares, yielding proceeds of approximately $228,000 (€230,459; £145,187).”
Stewart denies any malpractice, arguing that there had been an agreement between her and Bacanovic to sell her stock should the price dip below $60 a share. Faneuil initially backed up this account, but has since admitted there was no such arrangement.
•Stop Press: Stewart Resigns from Board of NYSE
Such was the reputation for probity of America’s media queen Martha Stewart that – unknown to most – she even sandwiched into her round of dedicated dollar-accumulation membership of the board of the New York Stock Exchange.
But following the guilty plea lodged Wednesday by Douglas Faneuil [see above], the homemaking honcho decided it timely to tender her resignation.
According to NYSE chairman Richard A Grasso: “Her resignation was accepted; there was no discussion.” Said Stewart: “I did not want the media attention currently surrounding me to distract from the important work of the NYSE and thus I felt it was appropriate to resign.”
As ever, the rent-a-quote brigade were at the ready. “As a board member, she had fiduciary responsibility,” opined the director of the Center for Corporate Governance at the University of Delaware, Charles M Elson. “The exchange must be run on trust and integrity, and the role of a director is to contribute to public confidence.”
In the wake of the announcement, shares of Martha Stewart Living Omnimedia fell to their lowest-ever level, declining over 8% to $6.21 (€6.30; £3.96). Speculation is now rife that Stewart is poised to quit the company founded on her good name.
Data sourced from: Multiple sources; additional content by WARC staff