Lawmakers asked the Justice Department on Tuesday to begin a criminal investigation into whether Martha Stewart knowingly lied to a House committee examining whether she received inside information before selling her ImClone stock.
“As members of Congress we believe it our obligation to forward specific and credible information in our possession that could suggest a federal crime has been committed,” members of the House Energy and Commerce Committee said in a letter to Attorney General John Ashcroft. The letter was signed by Republican and Democratic leaders of the panel.
Shares of Martha Stewart Omnimedia jumped nearly 10 percent on a surge in volume after the annoucement. The shares were trading up 75 cents at $8.50 in afternoon trading on the New York Stock Exchange.
The lawmakers said they have been prevented from resolving discrepancies and “suspicious communications” surrounding the stock sale because Stewart has repeatedly refused to be interviewed by the committee staff and because her attorneys have said she would invoke her Fifth Amendment right if subpoenaed.
In the letter, the committee said the investigation of Stewart was warranted because of questions about possible “misbehavior by corporate insiders” and because she is a prominent public figure who heads a publicly traded company.
The request for Justice Department action was announced at a news conference by Rep. Billy Tauzin, R-La., chairman of the committee and Rep. Jim Greenwood, R-Pa., chairman of the panel’s investigative subcommittee.
The letter cites the False Statements Act, which makes it a felony for anyone to “knowingly and willfully make any materially false statement” in an investigation by Congress. The penalty is up to five years in prison and a fine.
Earlier Tuesday, a Democratic member of the panel, Rep. Peter Deutsch, D-Fla., said Congress should focus more on the kinds of institutional problems that led to the Enron collapse and stop pursuing the Martha Stewart trading investigation.
“My recommendation for the last several weeks was that we process and give the information (on Stewart) to the Justice Department,” Deutsch said.
“The thing we’re not very good at is investigating and prosecuting,” the Florida Democrat said on CBS’s “The Early Show.” He said “our job is to deal with systemic issues in the country,” such as preventing such collapses and protecting workers’ 401(k) and other pension programs.
Deutsch was interviewed on the same day the House panel was to convene to decide where to turn next in its drawn-out investigation of Stewart, whose sale of ImClone stock has drawn heavy scrutiny. Stewart has refused to appear before the committee to answer questions.
She 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.
Stewart has steadfastly maintained that she 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 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 Stewart’s lawyers denying she had received any notice of the FDA’s decision, according to the committee.
The decision on how to proceed was dividing members of the House panel.
“I think the committee, against my recommendation, is going to punt this whole matter over to the Justice Department,” Rep. Bart Stupak ( news, bio, voting record), D-Mich., predicted Tuesday on NBC’s “Today” program.
“I think they’re going to come up with no conclusion,” he said, “and I believe they owe it to Martha Stewart and to the American people to finish this, and I think today we will be abdicating that.”
Ken Johnson, a committee spokesman, had said last week the panel “reached the end of the road” in trying to get Stewart’s cooperation and was considering legal action.
He said at the time that possible courses of action included the referral to the Justice Department for potential criminal prosecution.
Johnson also said phone records obtained by the committee appear to contradict statements by former ImClone president and Stewart friend Sam Waksal that he did not speak to her or her agents between Dec. 14 and Jan. 5, as well as Stewart’s assertion that Waksal did not return a call she made to him during that period.
Waksal is the only person who has been charged in the federal investigation of ImClone Systems Inc., which he founded. He pleaded innocent last month to charges of securities fraud, perjury, bank fraud and obstruction of justice.
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