Did Martha Stewart Engage in Insider Trading?

This is a partial transcript from On the Record with Greta Van Susteren, June 14, 2002. Click here to order the entire transcript of the show.

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GRETA VAN SUSTEREN, HOST:

VAN SUSTEREN:  Welcome back.  I'm Greta Van Susteren.  This is On the Record.

Tonight, dirty laundry for the decorating diva.  Martha Stewart has found herself at the center of an insider trading scandal.  Stewart admits she unloaded her ImClone stock the day before it collapsed back in December, but Stewart denies getting a tip on the Biotech firm's demise from then CEO Sam Waksal, now under arrest, who happens to be a friend of Stewart's.

Joining me now from New York, Terry Keenan, host of the Fox News money show Cashin' In, and Christopher Byron, author of Martha Inc.

Terry, first to you.  What is ImClone?

TERRY KEENAN, FOX NEWS:  ImClone is a biotechnology company that has a drug which was seemingly a promising drug to cure certain types of rare cancers, and it did not even really get a first look-at from the FDA, despite all of the hype, and once it became clear that the FDA wasn't going to start looking at this drug for possible approval, the stock just tanked, and it's down 80 percent since late December when that news came out.

VAN SUSTEREN:  All right.  And the drug —the FDA approval came out — let me go back to December.  Prior to the FDA approval — their disapproval — the fact that it wasn't going to be approved came out, did Martha Stewart own stock in this company?

KEENAN:  Yes, she did.  She bought it early on.  I think in the initial public offering stages.  The stock was red hot, so hot that ImClone was able to sell $2-billion worth of its stock to Bristol-Myers.  They took a big stake in the company, and Martha owned 5,000 shares.

VAN SUSTEREN:  Of course, now what the claim is or at least what people have said is that perhaps she unloaded her stock after it became apparent the FDA was not going to approve it.

Let me read a statement, Martha Stewart's statement, on the ImClone stock sale.  She said, "I did not speak to Dr. Samuel Waksal regarding my sale and did not have any non-public information regarding ImClone when I sold my ImClone shares."

And then she was quoted in Vanity Fair magazine in June — in this month's issue saying, "I have invested in ImClone since the beginning.  I was almost Sam's mother-in-law.  He dated my daughter, Alexis, for a very long time.  We've always kept our ImClone stock and profited handsomely from it.  My driver bought a house in Connecticut on ImClone."

Chris, your thoughts on this investigation and the fact that she had some stock and then she didn't have some stock, she sold it.

CHRISTOPHER BYRON, MARTHA INC., AUTHOR:  Yeah.  I mean, that's as much as we know right now.  We know that she had 3,900 shares, that she sold at exactly the moment — or that her broker sold at exactly the moment she was placing a phone call to try and solicit some information from her friend, Sam Waksal.

I'm very puzzled and I continue to be baffled by why she needed any information at all from Sam Waksal, whether he called her back or not, once she sold that stock.

VAN SUSTEREN:  Did she sell — did she sell all 3,900 shares?

BYRON:  Yes.  Yes.  Yes, she did.  And we ought to be clear about another thing, too.  It is by no means clear that she was not a more substantial holder than 5,000 shares of stock, which she could have traded in and out of very aggressively for a long period of time, and never have had to file a single paper with the SEC, the Securities and Exchange Commission, because these would have been less than 5 percent of the total shares in the company.  So she could have been a very active trader.

VAN SUSTEREN:  Terry, is she — I mean, in the big picture, is she a winner or a loser on the ImClone stock?

KEENAN:  In terms of her own personal finances?

VAN SUSTEREN:  Yes.

KEENAN:  She — in terms of the 5,000 shares that she bought and those 3,900 that she sold right at the moment that this information seemed to be coming out, she's a big winner.  Net proceeds probably about $230,000.  If she had held on, she'd only have about $30,000 today.

VAN SUSTEREN:  Now there's — I read someplace that said she had instructed her broker to sell if it went below 60, and, coincidentally, that date, it went below 60.  Your thoughts on that, Terry?

KEENAN:  Well, you know, she said that, but she didn't say she put in what's called a stop-loss order, because there would be a paper trail.

And remember, you know, this is a woman who puts out a calendar every month that details, you know, when she's going to planted her tulip bulbs for the next year.  She organizes and alphabetizes her underwear.

So you would think she'd be able to produce a piece of paper that would say, "Hey, this is what I did."  The statement seems to indicate that they had some sort of arrangement to do this, but there's no documentation.

VAN SUSTEREN:  All right.  Chris, in the 20 seconds we have left, the stop-loss order — did she put them in on every other trade, do you know?

BYRON:  Nobody has produced a single piece of paper for any stop-loss order or stop-limit order that's — may ever have been filed.  This all may have been done verbally or not at all.  We don't know.

VAN SUSTEREN:  All right.  Terry, Christopher, thank you very much.  Appreciate it.

Click here to order the entire transcript of the June 14 edition of On the Record.

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