"I'm so screwed."
Posted on 02/10/2004 12:03:45 PM PST by antivenom
NEW YORK (Reuters) - Martha Stewart (news - web sites) changed an incriminating telephone message after she discovered she was under investigation over an insider stock tip, but then immediately asked her assistant to restore the original, the aide testified on Tuesday.
Federal prosecutors called Ann Armstrong to testify against her long time boss in an effort to show that the trendsetter was aware she had committed a crime in trying to cover up the insider stock tip from her former stockbroker Peter Bacanovic.
Armstrong said Stewart altered a pivotal Dec. 27, 2001 telephone message that initially read, "Peter Bacanovic thinks ImClone is going to start trading downward" -- a reference to the stock sale at the center of the trial.
The assistant said that on Jan. 31, 2002, after Stewart learned her ImClone trade was under investigation, she asked Armstrong to call up her computerized phone messages log.
Armstrong said that when she scrolled to the fateful Bacanovic message, Stewart sat down at her aide's computer.
"She instantly took the mouse and put the cursor at the end of the sentence and highlighted back to the end of Peter's name and then she started typing over that."
The new version then read "Peter Bacanovic re: ImClone," Armstrong said.
Armstrong said Stewart then had a change of heart and, "Instantly stood up ... and she told me to put it back to the way it was."
Prosecutors say the message shows that Bacanovic wanted to tip Stewart to secret information that ImClone's founder was dumping his shares. Stewart sold her nearly 4,000 shares in the biotech company the day she got Bacanovic's call.
ImClone shares fell sharply the next day when it announced health regulators had given the thumbs down to Erbitux, a cancer drug that was to have been the company's main product.
Stewart's lawyer Robert Morvillo tried to show that his client did not want to conceal Bacanovic's original message.
"Did she ever ask you to lie or cover up this incident," Morvillo asked the assistant.
"No," Armstrong answered.
Armstrong, who broke down in tears on Monday apparently overwrought about testifying against her employer of six years, was more composed as she gave her second day on testimony, which went to the heart of the case against Stewart and Bacanovic, who are accused of conspiring to cover up insider trading.
They maintain there was a pre-existing order to sell ImClone Systems Inc. shares if they fell below $60.
When asked about the telephone message during an interview in February 2002 with investigators, Stewart said she did not know whether the phone message from Bacanovic had been recorded in the computerized log.
"I'm so screwed."
That still doesn't change the basic facts that the Broker is releasing inside information to his client. In a way this is like an entrapment. Martha did not request the information or seek to break the law, but was acting on information given to her by a licence Broker. To me it is the Broker who should be up on charges, but the broker is not the Billion dollar celebrity.
They put this at the end as if it were an afterthought. But I thought the most serious charges against her had to do with lying to investigators, not the trade itself. This is clear evidence that she lied to investigators.
The next house she decorates will be BIG with lotsa little rooms.
I assume he was given immunity to testify against Martha, but I haven't paid that close of attention to know.
The post sounds as if this was the sole information upon which she made the decision to trade, and if that's the case, this is a tempest in a teapot, IMHO. How the hell, before the stock takes a plunge, is she supposed to interpret "Peter Bacanovic thinks ImClone is going to start trading downward" as an insider tip as opposed to a broker's honest judgment?? After the price dropped, it would be obvious, or at least suspicious, but if she traded on information she reasonably believed to be legitimate, there should be no criminal charges (though she should probably disgorge the gains, since they were in fact illegitimate).
Martha Stewart has not been charged with "insider trading". I think the biggest charges are "lying to investigators" and " and "misleading investors in her own company about why she sold 3,928 shares of ImClone Systems (IMCL) stock in 2001".
My bet? She is found innocent.
I know people that have been involved in stock "pump-and-dump" schemes that fleeced people out of 10's of million of dollars. None have ever been touched by the SEC or anyone else. What Martha Stewart did (whatever that is) ain't spit compared to a lot of stuff that went on during the "dot.com" boom. And still goes on today. Stewart is small potatoes (with a lovely garnish to make the serving more attractive).
Deep pockets and career advancement for the prosecutor.
Follow the money, always follow the money.
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