Congress Disputes Stewart Stock Claims

Martha Stewart may have the kitchen and garden down pat, but she's having a heck of a time in the halls of Congress.

Investigators on Capitol Hill say they have information that contradicts Stewart's claim that she sold shares in biotech company ImClone based on public information and not through some insider knowledge she may have gleaned from friend and former ImClone chief executive Sam Waksal, who was arrested June 12 on charges of securities fraud and conspiracy.

House Energy and Commerce Committee investigators are curious about Stewart's sale of 4,000 shares of ImClone on Dec. 27, a day before the announcement that the Food and Drug Administration had decided not to approve Erbitux, the company's "miracle" drug for treating colorectal cancer.

Investigators are also interested in Merrill Lynch broker Peter Bacanovic and his assistant David Faneuil, who worked for Stewart, Waksal and Waksal's daughter. Faneuil told his firm that Stewart's stock sale was based on a "stop-loss" order, or an arrangement to sell the stock if it fell below $60, according to The Wall Street Journal. But Faneuil's latest statements — that the order was made on Dec. 10 and not in November as Stewart said — have aroused suspicion as to whether such an arrangement existed, and now investigators want to speak to both Bacanovic and Faneuil.

Bacanovic and Faneuil were suspended with pay on Friday pending an inquiry into "factual issues regarding a client transaction."

Investigators also want to look at Bacanovic's client list to see whether others dumped ImClone stock before the FDA rejection became publicly known.

Stewart's friend, Dr. Bart Pasternak, is also under suspicion for his sale of 10,000 shares of ImClone.

Pasternak's ex-wife Mariana Pasternak was on a plane with Stewart on the day she sold her stock. Investigators want to know if Pasternak gleaned information during the flight.

Pasternak insisted he, his ex-wife and Stewart have done nothing wrong.

"We certainly did not do anything that is under investigation," he said. "Our friendship with Martha makes us the subject of questioning. I'm absolutely convinced she did nothing wrong."

Stewart, who commands a multimedia empire and a profitable corporation, is increasingly under the glare of government scrutiny and tabloid attention — bringing investor displeasure. Shares of her company, Martha Stewart Living Omnimedia, had slumped to an historic low at Monday's close as questions about her stock sale continued to swirl.

Shares of Stewart's company have been battered since June 6, when reports surfaced of the congressional investigation of her ImClone stock sale.

The Associated Press contributed to this report.