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Martha Stewart: Is She In ‘Deep Doodoo’?

Aug 12, 2002 | Newsday

Prosecutors and congressional investigators appear to be turning up the heat on domestic diva Martha Stewart, now that her businessman pal Samuel Waksal has been indicted on fraud charges. A source close to the federal criminal investigation of alleged insider trading in the stock of Waksal’s former company, ImClone Systems, says that the word among investigators is that Stewart is in “deep doodoo.” Congressional investigators, who have unsuccessfully been negotiating for weeks with Stewart’s lawyers to arrange for her voluntary testimony before a House subcommittee, believe Stewart has been “stonewalling.”

INVESTIGATORS SAY STEWART’S lawyers initially told federal prosecutors, congressional aides and the SEC that she sold her 3,928 shares in ImClone per an understanding with her broker that the stock be dumped if the market price fell below a certain value. But sources say evidence from phone records and one or more witnesses has raised questions about the accuracy of Stewart’s explanation. Law-enforcement and congressional sources say that the U.S. attorney’s office in Manhattan is now investigating her for insider trading, making false statements and possible obstruction of justice. Ken Johnson, a spokesman for the House panel that is investigating the ImClone mess, told NEWSWEEK that Stewart’s story “has been tweaked several times by her lawyers.”

The committee now is “strongly considering” whether to issue a subpoena to compel Stewart to testify in public, Johnson said, adding: “If Ms. Stewart has been truthful, then why won’t she tell her story under oath?” A spokeswoman for Stewart told NEWSWEEK, “We decline comment.”

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