Prosecutors reportedly want to know if Martha Stewart misled them in explaining her sale of
Compounding her problems, the 26-year-old Merrill Lynch sales assistant who handled the trade for Stewart, Douglas Faneuil, has now said he was unaware of a pre-arrangement to sell the stock and that he made up his story after being pressured by Stewart's broker, Peter Bacanovic, according to a
Wall Street Journal
That is potentially significant to the investigation because Martha Stewart and Peter Bacanovic have said her Imclone sale was part of a pre-arranged strategy to sell when it fell below $60 a share.
Prosecutors have been probing Stewart's sale of Imclone, which happened a day before the FDA refused to review an application for its lead drug, Erbitux. According to the story, they've recently expanded their investigation to include whether Stewart committed obstruction of justice.
Imclone's former CEO, Sam Waksal, has been charged with insider trading for allegedly tipping family members before the FDA news came out, in order to avoid big losses.
Stewart has said that she had a verbal agreement with Bacanovic to sell the stock if it fell below $60. But doubts about whether or not the agreement existed have been raised because verbal stop loss orders are uncommon. Typically, a broker would keep a written record of that kind of information.
Merrill Lynch placed Bacanovic and Faneuil on administrative leave last Friday. Shares of
Martha Stewart Omnimedia
were trading down $2.77, or 20%, at $10.83.