Is Miss All-American Homemaker guilty of insider trading? Martha certainly should know about the rules of insider trading. She used to be a stock broker. And plus, she’s on the board of the New York Stock Exchange.
Though she claims innocence and has an alibi, the circumstancial evidence of her guilt can’t be dismissed easily.
She claims to have placed a stop-loss order of $60 on the stock. How do we know it was not just a sell order for $60? Merrill Lynch could not find any formal records of a stop-loss order ever placed by Martha. Also, she sold the stock for $58, not $60.
Martha claims that she sold the stocks based on publicly available information. What information could that be? Simply that the stock price was dipping? Why would she sell all of the shares simply by it dropping a few dollars?
Martha had close connections with ImClone CEO, Sam Waskal (he once dated Martha’s daughter, Alexis). You can’t assume someone is guilty by association. However, Sam’s daughters also placed sell orders the same day that Martha did. And Sam Rascal is now convicted of insider trading of leaking information to his daughters.
Also, Martha’s stockbroker, Peter Bacanovic, was the same stockbroker for Sam Rascal and his daughters. And interestingly Peter used to work at ImClone.
When Martha dumped ImClone on Dec 27, Peter was on vacation at the time. His assistant, Douglas Faneuil, was the one who executed the sale. Initially he went along with the stop-loss order alibi, but later recanted and said no such order was made. Along with Peter, Merrill Lynch placed a stop-loss order and suspended them to limit their losses.
Also, she made a call to Sam Rascal the same day she dumped all her shares. Why would she call him? To give him some “outsider” information?
Furthermore, a friend of Martha’s, Bart Pasternak, placed a sell order on ImClone on the same day. And his ex-wife and Martha were together the day before on her private jet plane.
Martha, attempting to clean her stained image, hired a crisis PR firm to help whitewash the mess. However, the stain might prove to be just too permanent to wash out.
Sources:
Yahoo Full Coverage
TheStreet
SmartMoney
Slate
US News
NT Post
Martha Hires Crisis PR Firm
US News – Gloria Borger
Martha Stewart’s Recipe for Disaster – Business 2.0
Martha’s Survival Is on the Chopping Block – Fortune
MarthaStewart.com
ImClone Stock
OmniMedia Stock
Added on 8/6/02:
Aide Was Reportedly Ordered to Warn Stewart on Stock Sales – NY Times