A House committee investigating Martha Stewart’s sale of stock in biotech company ImClone Systems Inc. (NasdaqNM: IMCL – News) has “reached the end of the road” in trying to get her cooperation and may take legal action as early as next Tuesday, a spokesman said Thursday.
Possible courses of action include a referral to the Justice Department for potential criminal prosecution, said Ken Johnson, a spokesman for Rep. Billy Tauzin (R., La.), chairman of the House Energy and Commerce Committee.
After discussions with lawyers for the domestic design tycoon in recent weeks, “We have reached the end of the road with respect to Martha Stewart,” Mr. Johnson said.
He also said that phone records obtained by the committee appear to contradict statements by former ImClone president and Stewart friend Sam Waksal that he didn’t speak to her or her agents between Dec. 14 and Jan. 5, as well as Ms. Stewart’s assertion that Mr. Waksal didn’t return a call she made to him during that period.
“This is yet one more indication that someone has lied to us,” Mr. Johnson said.
Stewart spokeswoman Allyn Magrino in New York declined comment Thursday.
Mr. Waksal is the only person who has been charged in the federal investigation of ImClone, which he founded. He pleaded innocent last month to charges of securities fraud, perjury, bank fraud and obstruction of justice.
Prosecutors have accused Mr. Waksal of secretly advising family members to sell their ImClone stock on Dec. 27 after learning that the company’s highly- touted colon cancer drug, Erbitux, had been rejected by the Food and Drug Administration.
Mr. Johnson said Rep. Tauzin had reached a decision on what action to take but won’t announce it until Tuesday because the committee staff “still has a few legal loose ends to tie up.”
“Clearly we have given Ms. Stewart every opportunity to meet with our investigators voluntarily and she has refused all of our overtures,” Mr. Johnson said. “As a result we are left with few choices.”
Ms. Stewart, who commands a multimedia empire as chief executive of Martha Stewart Living Omnimedia Inc. (NYSE: MSO – News) , has declined to meet with the investigators, saying it would be premature. Ms. Stewart’s lawyers have said they would do everything they could to comply with the committee’s requests for documents.
Mr. Johnson said the options include issuing a subpoena to Ms. Stewart to compel her testimony an action that has already been discussed by the panel in recent weeks, submitting a report to the Justice Department, the stronger step of making a criminal referral to Justice for possible prosecution, or simply ending the committee’s investigation.
Ms. Stewart sold nearly 4,000 shares of ImClone stock on Dec. 27, a day before the company’s application for federal review of Erbitux had been denied.
She has maintained she had told her Merrill Lynch broker to dispose of the stock if it dropped below $60 per share. The committee has been seeking to clear up discrepancies between her account of the sale and those of her now-suspended broker and his assistant.
Lawmakers have been trying to determine whether Ms. Stewart, before her stock sale, had information that the FDA was going to reject the drug. The company’s stock subsequently plummeted. Questions have remained despite an earlier letter from Ms. Stewart’s lawyers denying she had received any notice of the FDA’s decision, according to the committee.