House Subpoenas Stewart's Broker's Records

The congressional committee investigating the ImClone insider trading scandal tightened the noose around Martha Stewart's broker, issuing a subpoena Monday for his personal cell phone records for all of December.

The broker, Peter Bacanovic, who worked at Merrill Lynch & Co. and orchestrated Stewart's highly scrutinized sale of ImClone Systems Inc. shares, was placed on paid leave late last month, along with his assistant Douglas Faneuil. The brokerage house's action came after an investigation revealed discrepancies in statements of the two employees. Faneuil is currently being interviewed by the Justice Department, a source familiar with the case told The Associated Press.

A spokesman for the House Energy and Commerce Committee, Ken Johnson, said Monday that "[Bacanovic] had every opportunity to provide these records voluntarily, but we continued to get the run-around. He now has a choice. Turn over the documents or face contempt of Congress charges."

Merrill Lynch turned over documents, including records of a series of e-mails between Faneuil and Bacanovic on Dec. 27, the day that Stewart sold nearly 4,000 shares of ImClone stock. The next day, the Food and Drug Administration officially announced that it would not review the biotech company's application for the cancer drug Erbitux. ImClone's stock subsequently plummeted.

Stewart, chief executive of Martha Stewart Living Omnimedia Inc., is a personal friend of Sam Waksal, the former ImClone chief executive, who was arrested June 12 on charges of insider trading for allegedly trying to sell his stock and tipping off family members after learning of the FDA's decision.

Stewart has repeatedly denied any wrongdoing.

Bacanovic is the broker for Waksal and his daughter Aliza, as well as Stewart. Bacanovic was on vacation in Florida on Dec. 27, but the trade was executed by his assistant Faneuil.

Stewart has maintained that she had a prearranged agreement with Bacanovic to sell the stock when it fell below $60. After directing him to sell on Dec. 27, she called Waksal's office, but didn't speak to him.

Congressional investigators, however, doubt that the so-call "stop-loss order" ever existed, particularly after Faneuil said he acknowledged that he knew of no such arrangement. He had initially supported Stewart's and Bacanovic's claim after being pressured by the broker.

Johnson said Monday that the committee wants to know from Bacanovic's cell phone records at what time did he call Stewart. The committee is also hoping to learn if the broker contacted any of his clients, who also had ImClone shares.

Bacanovic has not met with congressional investigators.

Johnson said that the congressional committee also interviewed for several hours David Kies, a partner at law firm Sullivan & Cromwell, and a member of the ImClone board.

"We are trying to get a clearer picture of the events leading up to Dec. 28," Johnson said.

Bacanovic's attorney Richard Strassberg could not be reached immediately for comment. Jamie Moss, a spokeswoman for Marc Powers, Faneuil's attorney, declined to comment.