Posted on: Tuesday, February 24, 2004
Assistant backs Stewart on stock
By Allan Drury
(Westchester, N.Y.) Journal News
NEW YORK — Martha Stewart's stockbroker declared in November 2001 that ImClone Systems Inc. was "a dog" and suggested that Stewart should consider selling her shares if the price dropped to $60 or $61, a Stewart assistant testified yesterday.
Heidi DeLuca said Merrill Lynch & Co. Inc. broker Peter Bacanovic expressed that dim view of the drug company's stock on Nov. 8, 2001, seven weeks before Stewart sold her shares.
DeLuca, in response to questions posed by Bacanovic lawyer David Apfel, said she had called Bacanovic to ask him what it meant to "tender" shares and to speak to him about a form to transfer stock Stewart owned with two other brokerages.
Defense lawyers are using DeLuca, who handles financial matters for both Martha Stewart Living Omnimedia Inc. and Stewart personally, to try to show that Bacanovic and Stewart had an agreement for her to sell her ImClone stock if the price dropped to $60.
Prosecutors in U.S. District Court in lower Manhattan charge that Bacanovic, 41, and Stewart, 62, invented the story about an agreement to sell at $60 to cover up the real reason she sold her stock.
The government says that Bacanovic had his assistant, Douglas Faneuil, tip off Stewart on Dec. 27, 2001, that ImClone chief executive Samuel Waksal and members of his family were selling their shares.
Waksal, who was a personal friend of Stewart's, is serving an 87-month prison sentence because he knew when he sold his shares that his company was about to get official word from the U.S. Food and Drug Administration that the agency was rejecting ImClone's bid to market Erbitux, a colon cancer drug.
Though Stewart, who owns a 153-acre estate in Bedford, is not charged with insider trading, it is important for prosecutors to prove that she received an illicit tip. Otherwise, it will be harder for them to convince jurors that she and Bacanovic lied to investigators.
Among the audience of 100 people who listened to DeLuca's testimony was comedian Bill Cosby.
"I'm here for a friend," Cosby, wearing sunglasses, said to the throng of reporters who gathered around him. He joked that he brought Stewart a couple of boxes of Jell-O, a product he endorses, for her to enjoy.
Stewart lawyer Robert Morvillo has a request pending before Judge Miriam Goldman Cedarbaum that the obstruction and securities fraud charges against her be dropped.
The judge has indicated the securities fraud charge is the one she is most likely to consider dropping. That charge stems from public statements Stewart made in June 2002 in which she denied any wrongdoing in selling her ImClone stock.
The government charges she made those statements to help the price of her own company's stock.
Morvillo told the judge the government has not presented "independent corroborating evidence" that Stewart conspired with Bacanovic to lie to federal investigators.
"It's that lack of evidence which I think your honor has to focus on," Morvillo said.
During the weekend, Morvillo and lawyers for Bacanovic gave the judge written arguments for dismissing the charges.
Cedarbaum said after hearing oral arguments that she would hold off on making a decision, but did not set a time.
