Ending a three-month battle of wills, the House Energy and Commerce Committee referred its investigation into Martha Stewart’s well-timed sale of ImClone Systems stock to the Justice Department, asking that prosecutors determine whether Stewart ”caused materially false representations to be made” to its members.
Committee Chairman W.J. ”Billy” Tauzin, R-La., told a press conference that Stewart’s refusal to meet with committee members to explain the circumstances of her sale of ImClone stock on Dec. 27, the day before a negative Food and Drug Administration report sent the stock price south, left no other alternative. ”This is serious business,” he said of his panel’s investigation. ”This is not fun and games.”
Robert Morvillo, an attorney for Stewart, said, ”I strongly disagree with the analysis of the committee and its staff but am pleased that the matter will now be exclusively in the hands of professional law enforcement authorities who are trained to conduct a responsible and thorough investigation.”
To support his actions, Tauzin cited inconsistencies between what Stewart’s lawyers told the committee and what the committee learned on its own:
Stewart’s attorneys said she sold ImClone stock after talking with Merrill Lynch broker Peter Bacanovic at 1:41 p.m. on Dec. 27. Records show that Bacanovic tried to reach Stewart between 10 and 11 a.m. that day and that Stewart spoke with Bacanovic’s assistant, Douglas Faneuil, at 1:41 p.m.
Stewart’s attorneys also said she sold ImClone that day because of a pre-existing agreement between her and Bacanovic to sell if the stock dropped below $60. But the committee maintains that there’s no proof of any such agreement. Phone records show several calls between former ImClone CEO Sam Waksal and Stewart in the days before Dec. 27.
Waksal, a friend of Stewart’s, learned on Dec. 20 that the FDA would issue a ruling on Erbitux, its cancer-fighting drug, on Dec. 28. Waksal has been charged with bank fraud, securities fraud and obstruction of justice related to his alleged attempts to sell ImClone stock on Dec. 27.
Some experts are skeptical of the committee’s legal arguments, noting that Stewart herself never made any statement to the panel.
”If that’s all the committee has, it seems like the proof at present is thin,” says Stephen Crimmins of the law firm Pepper Hamilton. ”You need solid and definitive proof that the person who made the statement is lying. They’re not making the referral on Martha Stewart’s own statement, but on statements made by lawyers representing her.”