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CNN Live At Daybreak

Martha Stewart Accused of Insider Trading

Aired June 18, 2002 - 05:45   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM And MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: Martha Stewart's reputation has been rocked by allegations of insider trading of ImClone stock.

As CNN's Steve Young reports, Stewart's own company is now taking a hit.

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STEVE YOUNG, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): It sells Martha's brands not Martha's stock. But if it did, you might hear, attention Kmart shoppers, price mark down on Martha Stewart Omnimedia. With stories continuing of an investigation into her possible insider trading in ImClone stock, the Martha Stewart Omnimedia Company Monday lost $21 million in market value. The total loss has been about $195 million since the first stories of her possible involvement.

HOWARD DAVIDOWITZ, RETAIL CONSULTANT: If this drags on and she is guilty, it's over. I mean it's be -- that'll be the end of the Martha Stewart brand. There will be no more Martha Stewart brand. It's over.

YOUNG: Stewart says she did nothing wrong. She claims she decided to sell ImClone stock in November before any sign from the FDA that it might not approve ImClone's cancer drug Erbitux. She says she gave the instruction orally in November to her Merrill Lynch broker Peter Peganovic (ph). But "The Wall Street Journal" Monday reported the broker says according to his notes it wasn't November but mid- December.

Stewart is friends with ImClone's former CEO Samuel Waksal who by then had indications the drug might be turned down.

JAY STRUM, KAYE, SCROLER: It's her position, as I understand it, that she gave such an instruction orally in November. So I don't know what record would exist in writing were that to be true. So I don't know what it is she could bring forward to prove that in fact she did what she said she did.

YOUNG: Stewart's office late Monday said she stands by her statement she's done nothing wrong. Peganovic's office said he was out of town. And Merrill Lynch gave no details about Martha Stewart's ImClone trade. (on camera): One retailing expert said if Stewart's not guilty, she'll be able to rebound because she's a smart, tough operator who will know how to fix perceptions.

Steve Young, CNN Financial News, New York.

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