Schachter and other lawyers in the Justice Department and at the SEC, since ordinarily lawyers decline comment on pending investigations or make a vague statement of innocence, preferring to develop the facts within the still private confines of the investigation. Here Savarese had denied any communications between Stewart and Waksal that week, which was technically true, although he made no mention of Stewart’s insistent call and message demanding to know what was going on with ImClone.
The Journal article quoted subcommittee chairman James Greenwood, Republican from Pennsylvania: “Our level of interest is very high. We’ve been tracking the precise chronology of the sales, and how that compares to who knew what and when. What we know is that if you make a trade because you know something that is not public and that other stockholders don’t know, that’s insider trading. And that’s what we want to take a look at.”
The story was a bombshell at the offices of Martha Stewart Omnimedia, where until then practically no one knew anything was amiss. When Stewart herself arrived that day, Sharon Patrick, the company’s chief executive, intercepted her and gave her a big hug in the corridor just outside her office, a conspicuous show of support. Now, suddenly, some employees were being told to get lawyers, including Ann Armstrong and Kevin Sharkey. Sharkey was spotted sobbing in Stewart’s office, his head on her desk.
Until then, it was ImClone’s stock price that had been getting all the attention. But the Journal article suddenly thrust another stock into the spotlight: Martha Stewart Omnimedia (MSO). To investors, Martha Stewart, the person, was indistinguishable from Martha Stewart, the brand, and Martha Stewart, the company. Few businesses relied so heavily on the talents and image of a single person. Should Stewart face criminal charges, the consequences could be dire.
The day the AP article appeared, on June 6, MSO shares closed at $19.01, just 22 cents lower than the day before. The Stewart news had been buried, and the impact was minimal. But the day of the Journal article they plunged, closing at $17.39 after dropping as low as $16.80.
At 6:30 a.m. on June 12, four FBI agents converged on Waksal’s SoHo loft. He was arrested, handcuffed, and later arraigned on charges of insider trading, perjury, obstruction of justice, and fraud.
A t Merrill Lynch, the mounting publicity over the Waksal charges and the revelation that Martha Stewart had sold her ImClone shares had no evident effect on Peter Bacanovic. Periodically, he’d look to Faneuil for reassurance. “We’re on the same boat, right, Doug?” he’d ask. Faneuil would nod or answer, “Yeah,” but he did so halfheartedly. But there were no more invitations to breakfast or lunch, and no more offers of free airline tickets.
With Waksal’s arrest and insider trading charges, the scrutiny of Martha Stewart quickly intensified. MSO stock plunged again the day of Waksal’s arrest, dropping 12 percent. Stewart was deluged with media inquiries about her sales of ImClone shares and ties to Waksal. She had her longtime public relations adviser and close confidante Susan Magrino issue a statement, carefully reviewed by her lawyers. The statement reiterated the points that Savarese had shared with the Journal and concluded, “In placing my trade I had no improper information. My transaction was entirely lawful.”
The statement seemed to stabilize the stock, but it unleashed a storm of media coverage. The irreverent New York Post launched a steady stream of headlines : “Martha’s Prison Everyday Collection,” “Martha’s Stewing,” and “Martha in Hell’s Kitchen.” The Daily News countered with “Diva Martha’s Now in the Soup.” The story vaulted to television, with Good Morning America taking it up on June 17. David Letterman joked, “I was watching her show and she had to accept a subpoena wearing an oven mitt.”
The next
The Journal article quoted subcommittee chairman James Greenwood, Republican from Pennsylvania: “Our level of interest is very high. We’ve been tracking the precise chronology of the sales, and how that compares to who knew what and when. What we know is that if you make a trade because you know something that is not public and that other stockholders don’t know, that’s insider trading. And that’s what we want to take a look at.”
The story was a bombshell at the offices of Martha Stewart Omnimedia, where until then practically no one knew anything was amiss. When Stewart herself arrived that day, Sharon Patrick, the company’s chief executive, intercepted her and gave her a big hug in the corridor just outside her office, a conspicuous show of support. Now, suddenly, some employees were being told to get lawyers, including Ann Armstrong and Kevin Sharkey. Sharkey was spotted sobbing in Stewart’s office, his head on her desk.
Until then, it was ImClone’s stock price that had been getting all the attention. But the Journal article suddenly thrust another stock into the spotlight: Martha Stewart Omnimedia (MSO). To investors, Martha Stewart, the person, was indistinguishable from Martha Stewart, the brand, and Martha Stewart, the company. Few businesses relied so heavily on the talents and image of a single person. Should Stewart face criminal charges, the consequences could be dire.
The day the AP article appeared, on June 6, MSO shares closed at $19.01, just 22 cents lower than the day before. The Stewart news had been buried, and the impact was minimal. But the day of the Journal article they plunged, closing at $17.39 after dropping as low as $16.80.
At 6:30 a.m. on June 12, four FBI agents converged on Waksal’s SoHo loft. He was arrested, handcuffed, and later arraigned on charges of insider trading, perjury, obstruction of justice, and fraud.
A t Merrill Lynch, the mounting publicity over the Waksal charges and the revelation that Martha Stewart had sold her ImClone shares had no evident effect on Peter Bacanovic. Periodically, he’d look to Faneuil for reassurance. “We’re on the same boat, right, Doug?” he’d ask. Faneuil would nod or answer, “Yeah,” but he did so halfheartedly. But there were no more invitations to breakfast or lunch, and no more offers of free airline tickets.
With Waksal’s arrest and insider trading charges, the scrutiny of Martha Stewart quickly intensified. MSO stock plunged again the day of Waksal’s arrest, dropping 12 percent. Stewart was deluged with media inquiries about her sales of ImClone shares and ties to Waksal. She had her longtime public relations adviser and close confidante Susan Magrino issue a statement, carefully reviewed by her lawyers. The statement reiterated the points that Savarese had shared with the Journal and concluded, “In placing my trade I had no improper information. My transaction was entirely lawful.”
The statement seemed to stabilize the stock, but it unleashed a storm of media coverage. The irreverent New York Post launched a steady stream of headlines : “Martha’s Prison Everyday Collection,” “Martha’s Stewing,” and “Martha in Hell’s Kitchen.” The Daily News countered with “Diva Martha’s Now in the Soup.” The story vaulted to television, with Good Morning America taking it up on June 17. David Letterman joked, “I was watching her show and she had to accept a subpoena wearing an oven mitt.”
The next
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