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Martha Pals Targeted

Aug 12, 2002 | The New York Daily News

Federal investigators have questioned scores of Martha Stewart's friends and employees to see if she has broken the law, sources say.
Probers are drawing a circle around Stewart, tracking down anyone close to her who may be involved - even peripherally - in her Dec. 27 sale of 4,000 shares of ImClone stock just before the shares tanked.

They include workers at Stewart's media empire, Martha Stewart Living Omnimedia, among them Stewart's personal assistant, Ann Armstrong, andher business manager, Heidi De Luca.

It also includes Stewart's friends Mariana Pasternak and her ex-husband, Dr. Bart Pasternak, both of whom sold ImClone stock around the same time Stewart dumped hers.

The key question is: Did Stewart sell her stock because she had heard that relatives of her close friend, Sam Waksal, the now-indicted ImClone founder, were frantically dumping theirs?

Lawmakers want those answers, too, and have given the princess of perfection until Aug. 20 to pony up what she knows.

Stop-Loss Issue

"We can't sweep something like this under the rug because Martha Stewart is a celebrity, and so I think that we're probably going to have to subpoena her," Rep. Jim Greenwood (R-Pa.), chairman of the House energy and commerce subcommittee, told CNN yesterday.

Stewart has told federal prosecutors that she had instructed her broker, Peter Bacanovic, to sell if ImClone dropped below $60. She said the stop-loss order was not put in writing and has insisted that she "did not have any nonpublic information regarding ImClone when I sold my ImClone shares."

So far, one key player has contradicted Stewart's stop-loss story - Bacanovic's assistant, Douglas Faneuil, who sources say talked with Stewart during a conference call that day about 1:30 p.m., 13 minutes before Faneuil executed the trade.

He has told investigators he never heard of a stop-loss order, and was instructed by Bacanovic to tell her when Waksal family members were getting rid of their stock.

That kind of information could be considered nonpublic, and if Stewart was aware of it, prosecutors could argue she decided to sell based on that tip.

That version is backed up by the fact that Bacanovic was the broker for Waksal's daughter Aliza, who sold off her ImClone stock that morning.

Broker Out Of Town

Someone at Merrill Lynch executed the trade of Aliza Waksal's stock for Bacanovic, who was on vacation in Miami but was still involved in the sale of Stewart's ImClone stock and was likely aware of Aliza Waksal's actions.

Investigators now must see if Bacanovic somehow indirectly communicated that highly volatile information to Stewart. So far they've found no record that Bacanovic talked directly with Stewart, but that he sent word through Faneuil, who reached out to Stewart and her assistants.

Armstrong, for instance, arranged the conference call between Stewart and Faneuil.

Later that day, Stewart may have talked about ImClone with Mariana Pasternak on a flight they shared to Mexico.

Pasternak is not formally cooperating with the prosecutors, but she has answered their questions about Dec. 27 - although it's unclear whether her answers contradict Stewart, sources said.

Lawyers for Pasternak, Bacanovic, Faneuil and Stewart all declined to comment. Neither Armstrong nor De Luca could be reached.

A lawyer for Sam Waksal, who is scheduled to be arraigned today in Manhattan Federal Court, also did not return calls.

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