12:54 AM EST June 05, 2003
The Associated Press
Here are excerpts from Wednesday's indictment charging Martha Stewart and broker Peter Bacanovic, statements from Stewart's attorneys, and the Securities and Exchange Commission lawsuit against Stewart and Bacanovic.
INDICTMENT
The indictment describes Stewart's sale of 4,000 shares of biotech drug maker ImClone Systems Inc. in December 2001, allegedly based on illegal inside knowledge that the family of ImClone founder Samuel Waksal was planning to sell its shares ahead a disappointing government report on an ImClone cancer drug.
"As a client of Merrill Lynch and as a former securities broker, Martha Stewart knew that information regarding the sale and attempted sale of the Waksal shares had been communicated to her in violation of the duties of trust and confidence owed to Merrill Lynch and its clients."
Stewart and Merrill stockbroker Bacanovic "agreed that rather than tell the truth about the communications with Stewart on Dec. 27, 2001, and the reasons for Stewart's sale of ImClone stock on Dec. 27, 2001, they would instead fabricate and attempt to deceive investigators with a fictitious explanation for her sale - that Stewart sold her ImClone stock on Dec. 27, 2001, because she and Bacanovic had a pre-existing agreement to sell the stock if and when the price dropped to $60 per share."
The indictment also discusses how her alleged actions hurt her own company's shareholders.
"Martha Stewart's reputation as well as the likelihood of any criminal or regulatory action against Stewart were material to (Martha Stewart Living Omnimedia) shareholders because of the negative impact that any such action or damage to her reputation could have on the company which bears her name, as Stewart well knows."
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STATEMENT FROM STEWART'S ATTORNEYS:
The lawyers, Robert G. Morvillo and John J. Tigue, note that investigators did not charge Stewart with criminal insider trading itself. They also question the government's motivation.
"It is most ironic that Ms. Stewart faces criminal charges for obstructing an investigation which established her innocence. This turn of events can only be characterized as bizarre and raises questions about the motivation for such peculiar charges."
"Why then has the government, after nearly a year and a half, chosen to file these charges? Is it for publicity purposes because Martha Stewart is a celebrity? Is it because she is a woman who has successfully competed in a man's business world by virtue of her talent, hard work and demanding standards? Is it because the government would like to be able to define securities fraud as whatever it wants it to be? Or is it because the Department of Justice is attempting to divert the public's attention from its failure to charge the politically connected managers of Enron and WorldCom who may have fleeced the public out of billions of dollars?"
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SEC LAWSUIT
The lawsuit alleging civil insider trading violations describes the alleged actions of Stewart, Bacanovic and Bacanovic's assistant, Douglas Faneuil, on Dec. 27, 2001. Faneuil pleaded guilty last year to a misdemeanor in connection with the case.
"In response to hearing from Faneuil that Waksal and his daughter had placed orders to sell all of their ImClone stock at Merrill Lynch, Bacanovic told Faneuil to call Stewart with Bacanovic on the line. They did not reach Stewart, but Bacanovic left a message with Stewart's assistant that `Peter Bacanovic thinks ImClone is going to start trading downward.'"
"The defendants fabricated an alibi for Stewart's trade and misrepresented facts concerning Stewart's trade. In interviews on Feb. 4 and April 10, 2002, with the government, Stewart falsely stated, among other things, that: (1) she sold her ImClone stock because she and Bacanovic had decided in November or December that she would sell if ImClone's stock price fell below $60 per share; (2) she placed her order directly with Bacanovic, not Faneuil; (3) she did not know whether Waksal was Bacanovic's client; and (4) she had no recollection of being told that any of the Waksals were selling their ImClone stock."
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