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CNN Live Today

Martha Stewart's Friend in Touch with Investigators

Aired August 09, 2002 - 13:15   ET

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

FREDRICKA WHITFIELD, CNN ANCHOR: Well, another scandal that's rocking Wall Street, Martha Stewart and the ImClone insider-trading probe. The "Wall Street Journal" reports that a friend of Martha is cooperating with investigators.
CNN's Louise Schiavone has been following this story, and has the latest from Washington, and it's just getting hotter and hotter all the time for Martha and her friends.

LOUISE SCHIAVONE, CNN CORRESPONDENT: That's right. The plot thickens. Congress is turning up the heat on decorating magnate Martha Stewart. For some time, Congress, federal prosecutors, and the Securities and Exchange Commission has been asking if insider information prompted Stewart's late December sale of roughly 4,000 ImClone stocks. An expanded probe of Stewart now focuses on possible insider trading, obstruction of justice, and making false statements about her ImClone stock sale.

With ImClone founder Sam Waksal now facing additional charges of bank fraud and obstruction of justice on top of perjury and securities fraud, investigators are more interested than ever in how the Stewart stock sale fits into the case.

A spokesman for the House Energy and Commerce Committee tells CNN Financial News, -- quote -- "We are considering the possibility of issuing a subpoena to Martha Stewart to appear before our committee. However, Chairman Tauzin has not made a final decision," -- end quote.

Now with the case expanding, Congress is giving Stewart and her lawyers until August 20 to produce e-mail and telephone records, as well as any other personal or business records connected to her ImClone stock sale.

In a letter this week to the lifestyle guru, lawmakers reiterated their interest in talking to Stewart, stating, -- quote -- "Although your trade began as a peripheral issue to the ImClone investigation, your trade and its circumstances and statements made on your behalf are now serious ones. We want to assure ourselves that you have not attempted to mislead this committee with the intent to obstruct an investigation."

Meanwhile, investigators want to know more from a friend of Stewart's, a woman by the name of Mariana Pasternak. She is the ex- wife of Waksal friend Dr. Bart Pasternak, who himself sold 10,000 ImClone shares before the FDA rejected ImClone's research methods for a key anti-cancer drug. That move sent the stock value plunging. Mariana Pasternak had been traveling to Mexico with Stewart just after Christmas last year, on the same day that Stewart decided to dump her stock. A source close to the investigation tells CNN that U.S. attorneys, who are eager to know more about Stewart's ImClone sale from Mrs. Pasternak, have asked the committee to -- quote -- "lay off" Mrs. Pasternak -- Fredricka.

WHITFIELD: So I suppose some of the questions that the investigators might be asking Mariana Pasternak is, Where you nearby when Martha may have been on the telephone talking about instructions, possibly or talking about stock, or talking about any kind of business. Are these the line of kind of questions that they might be asking her? What she may have overheard?

SCHIAVONE: Well, that's right. Mariana Pasternak and Martha Stewart were on the same private jet heading to Mexico a couple of days after Christmas. They made a stop in San Antonio, Texas, I guess to refuel, and it was at that point that Martha Stewart called her broker and in some way executed the sale of her 4,000 stocks.

Now, Mrs. Pasternak has been in touch with the committee that is investigating this, the congressional committee, but when she was asked about Martha Stewart's sale, and what she knew about that, she asked to talk to her lawyer. So, that's where that investigation ended. So it just gets more and more complicated for Martha Stewart.

WHITFIELD: Yes, really does.

Now, you mentioned whether -- Representative Tauzin said they just may, may, may underscore the word "may," want to subpoena Martha Stewart, but they are still waiting for this August 20 deadline for her to produce any kind of e-mail or any kind of correspondence or records of correspondence. So I suppose, once they receive that kind of information, that will help determine whether, indeed, a subpoena should be merited?

SCHIAVONE: Well, they've been really going easy on this question for months. They've been in touch with Martha Stewart's lawyer, and they have been saying all along the issue is not about Martha Stewart, and you can imagine what a media sensation that would be if Martha Stewart were to come to Washington, go to Capitol Hill, have to raise her hand the way all the other witnesses have had to raise their hand and swear to tell the truth. That would be a media sensation, and what Congress is trying to do is keep the focus on the issue, which began as the FDA approval process for drugs, and how it got really messed up in the ImClone case.

So once you bring Martha Stewart into this case, who is a big international media celebrity, then the focus becomes very skewed, so they are trying not to make it a case about Martha Stewart, but they're trying to make it a case about how drug approval methods do affect stocks.

WHITFIELD: All right. Louise Schiavone, thank you very much for putting it all in perspective for us, reporting from Washington at this hour. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com