Feds said to eye Martha
Report: Prosecutors look into whether Stewart had inside information for ImClone stock sale.
June 14, 2002: 10:32 AM EDT
NEW YORK (CNN/Money) - Federal prosecutors are looking at whether home decor expert Martha Stewart had inside information when she sold shares of ImClone Systems Inc. in December, even though she had indicated she might sell two months earlier, a newspaper reported Friday.
Stewart has continually denied any improper activity regarding ImClone stock.
The Wall Street Journal, citing a person close to the case, said investigators are actively investigating whether Stewart had any contact with former ImClone CEO Samuel Waksal or anyone else who could have tipped her that the Food and Drug Administration was about to reject ImClone's promising cancer drug in December.
Stewart, founder and chief executive of Martha Stewart Living Omnimedia Inc. (MSO: Research, Estimates), which sells cookbooks, housekeeping magazines and other items, said Wednesday that she did not have any non-public information when she sold her ImClone (IMCL: Research, Estimates) stock.
Stewart sold about 3,900 of the shares on Dec. 27, a day before the company said the FDA had refused to review the application for the drug, Erbitux.
In her statement Wednesday -- the same day Waksal was arrested and charged with tipping off family members about the impending rejection of Erbitux, which sent ImClone's stock tumbling -- Stewart denied any wrongdoing, saying she had tried to sell the stock since October.
Stewart said she had formed an agreement with her broker to sell her remaining shares of ImClone if the stock dropped below $60 a share. How and when that agreement was put into effect is critical in determining whether inside information about the FDA rejection may have affected her decision to sell, the Journal said.
The newspaper said a Stewart spokeswoman declined to comment Thursday, beyond the statement issued Wednesday.
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Federal prosecutors Wednesday charged Waksal with conspiracy, securities fraud and perjury involving an alleged insider trading scheme in ImClone shares. The Securities and Exchange Commission filed a related civil complaint. Waksal has denied the allegations and took the 5th, declining to testify before the congressional panel probing the rejection of Erbitux.
Waksal's brother, Harlan, the current ImClone CEO, told lawmakers that the company "let patients down" by submitting a flawed application to the government for approval of the drug.
A document released by the congressional panel indicates that ImClone and Bristol-Myers Squibb, who were working together Erbitux, had discussed being deliberately vague about what they disclosed to the public regarding the FDA's decision to reject the drug, the Journal reported.
Martha Stewart Living stock fell again Friday after dipping 1.3 percent Thursday and tumbling 12 percent Wednesday, the day of Waksal's arrest.