Stewart refuses to be questioned by Congress

`Discrepancies' noted in ImClone-sale details from her and her broker

August 07, 2002|By BLOOMBERG NEWS

WASHINGTON - Martha Stewart has refused to answer questions before a congressional committee investigating her trading in shares of ImClone Systems Inc., members of the committee noted in a letter to Stewart yesterday.

"We have been informed that on advice of your counsel you will not agree to be interviewed by the committee at this time under any condition," said the letter, which was released in a statement by the House Energy and Commerce Committee. "We want to assure ourselves that you have not attempted to mislead this committee with the intent to obstruct an investigation."

The panel asked Stewart for more records about her sale of ImClone shares before U.S. regulators rejected the company's cancer drug. The committee said it wants to resolve "discrepancies" between accounts of her trading by Stewart, Merrill Lynch & Co. broker Peter Bacanovic and his assistant.

The letter was sent yesterday to Stewart, the founder of Martha Stewart Living Omnimedia, committee spokesman Ken Johnson said.

"We're through asking nicely," Johnson said. "If Ms. Stewart has done nothing wrong, as her lawyers maintain, why won't she tell her story under oath?"

Stewart has said she had no inside information before selling 3,928 ImClone shares in December. ImClone was founded by her friend Samuel D. Waksal, who has been charged with violating securities laws by tipping off family members that the drug application had been rejected.

Stewart's attorney, Jeffrey Smith, responded to the committee in a letter, calling the request for an interview "premature."

The letter was faxed to Bloomberg News by Martha Stewart spokeswoman Allyn Magrino.

"We requested that the committee defer its request for a staff interview at least until after the August recess [by Congress] or until such time as we were better informed," Smith wrote.

The lawyer asked to be told about "any theories of the underlying facts with respect to Ms. Stewart's conduct."

Martha Stewart Living shares have lost half of their value this year as investigations by Congress and federal prosecutors hurt sales.

Chief Financial Officer James Follo said last month that some advertisers are holding back from buying ads in Stewart's magazines until the investigations are resolved.

Shares up 5 cents yesterday

Shares of New York-based Martha Stewart Living rose 5 cents to $8.17 yesterday on the New York Stock Exchange.

Martha Stewart's "reputation is important, very important, to the company," said Boniface Zaino, who helps manage about $1.3 billion for Royce & Associates Inc.

Stewart and Bacanovic have said they agreed in November to sell ImClone shares if they fell below $60, which they had on the day that Stewart sold.

The committee has "known for some time" that there was no formal order for Merrill to sell Stewart's ImClone shares at $60, Johnson said yesterday.

E-mails sought

The letter asks Stewart to turn over e-mails she sent or received from Dec. 1 to Jan. 9 relating to ImClone, Waksal or her Merrill Lynch account.

It seeks her phone records for the same period, records held by Stewart's business manager, Heidi DeLuca, from Sept. 1 to Jan. 9 and all records of phone numbers for DeLuca from Dec. 1 to Jan. 9.

A Merrill Lynch trading assistant has admitted to federal prosecutors that he alerted Stewart that Waksal was selling ImClone shares, The New York Times and The Wall Street Journal reported yesterday, citing people familiar with the investigation.

Investor files suit

Merrill Lynch is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.

Also yesterday, an investor filed a stock-fraud suit against Martha Stewart Living. Todd Semon claimed that Stewart lied to investors about her ImClone sale and that her statements can be imputed to Martha Stewart Living because she and the company "are inextricably linked."

Semon also sued Stewart.

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