United States Vs Marthat Stewart

Martha Stewart and Peter Bacanovic were indicted on criminal charges arising from Martha Stewarts December 27, 2001 sale of 3,928 shares of stock in ImClone Systems, Inc. ("ImClone"). ImClone is a biotechnology company whose then-chief executive officer, Samuel Waksal, was a friend of Stewart's and a client of Stewart's stockbroker at Merrill Lynch, defendant Peter Bacanovic. On December 25, 2001, ImClone learned that the Food and Drug Administration had rejected the company's application for approval of Erbitux, a cancer-fighting drug. On December 28, the day after Stewart sold her shares; ImClone publicly announced that the Erbitux application had been rejected. Shortly after ImClone's announcement, the Securities and Exchange Commission "SEC" and the United States Attorney's Office for the Southern District of New York launched investigations into trading in ImClone stock in advance of the announcement to the public of the news about Erbitux.

During the investigation each defendant was questioned twice. Martha Stewart was interviewed at the office of the United States Attorney on February 4, 2002 and by telephone on April 10, 2002. Among those present during Stewart's interviews were Special Agent Catherine Farmer of the FBI and Helene Glotzer, a lawyer with the SEC's Enforcement Division. Peter Bacanovic was interviewed by telephone on January 7, 2002. Present at that interview were Glotzer and another SEC attorney, Jill Slansky, as well as David Marcus, a Merrill Lynch attorney. On February 13, 2002, Peter Bacanovic testified under oath before the SEC. He was questioned by three SEC attorneys: Glotzer, Slansky, and Laurent Sacharoff. His testimony was tape recorded.

The jury convicted Stewart of making false statements to investigators during her February 4 interview, in violation of 18 U.S.C. § 1001. The jury found Stewart guilty of making the following false statements, each of which was a specification in Count Three of the Indictment. Martha Stewart told the Government investigators that she spoke to Peter Bacanovic on December 27 and instructed him to sell her ImClone shares after he informed her that ImClone was trading below $ 60 per share. Martha also stated that during the same telephone call, she and Peter Bacanovic discussed the performance of the stock of her own company, Martha Stewart Living Omnimedia ("MSLO"), and discussed K-Mart. She told investigators that she had decided to sell her ImClone shares at that time because she did not want to be bothered during her vacation. Stewart stated that she did not know if there was any record of a telephone message left by Peter Bacanovic on December 27 in her assistant's message log. She also said that since December 28, she had only spoken with Peter Bacanovic once regarding ImClone, and they had only discussed matters in the public arena. Finally, Stewart told investigators that since December 28, Peter Bacanovic had told her that Merrill Lynch had been questioned by the SEC regarding ImClone, but that he did not tell her that he had been questioned by the SEC or that he had been questioned about her account.

The jury acquitted Stewart of one specification charged in Count Three: her statement that she and Peter Bacanovic had agreed, at a time when ImClone was trading at $ 74 per share that she would sell her shares when ImClone started trading at $ 60 per share.

The jury found Martha Stewart guilty of making the following false statements to investigators during her April 10 interview. Each of these statements was a specification in Count Four of the Indictment. Martha Stewart said that she did not recall if she and Peter Bacanovic had spoken about Sam Waksal on December 27 and that she did not recall being informed that any of the Waksals were selling their ImClone stock. Martha also reiterated that she spoke to Peter Bacanovic on December 27, that he told her the price of ImClone shares, and that he suggested that she sell her holdings.

The jury did not find Martha Stewart guilty of one false statement specification charged in Count Four: her statement that sometime in November or December of 2001, after she sold ImClone shares held in the Martha Stewart Defined Pension Trust, she and Peter Bacanovic decided she would sell her remaining ImClone shares when they started trading at $ 60 per share.

The jury found Peter Bacanovic guilty of making one false