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American Morning

Interview with James Greenwood

Aired August 20, 2002 - 07:47   ET

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

BILL HEMMER, CNN ANCHOR: Martha Stewart has received an invitation she cannot refuse. The domestic diva must turn over phone, e-mail and trading records relating to her sale of about 4,000 shares of ImClone stock going back to last December. If not, she will face a possible subpoena to appear before the House Energy and Commerce Committee.
Pennsylvania Representative James Greenwood heads up that panel. He is live with us this morning in Philadelphia.

Sir, good to see you -- good morning.

REP. JAMES GREENWOOD (R), PENNSYLVANIA: Good morning.

HEMMER: About a week ago, you were talking with Paula, in fact, on this very issue. You said, "probably" you would issue a subpoena.

Have you advanced the ball beyond that from a "probably" to a sure thing?

GREENWOOD: No, not really. What we did is, because Ms. Stewart has declined to voluntarily come in and chat with our investigators, we issued this document request for her e-mail and phone and trade records, as you mentioned. Those will be received by our committee today by close of business. Her lawyers have assured us of that.

We'll review that information, and between today and Labor Day, we'll see what the Justice Department does. We'll see what the Securities and Exchange Commission does. We'll see if she has a change of heart and would like to come in and answer a few questions for us to substantiate, if she can, the representations that she has made to us. And then, we'll make a decision about subpoenaing her.

I don't have any great heart to drag her before the committee for a media circus. On the other hand, just because you're rich and famous doesn't mean that you get treated specially.

HEMMER: Go back just a little bit, Representative. Why would you suggest, then, about 10 days ago that a subpoena is probably headed their way?

GREENWOOD: Because her attorneys have been completely firm in their resistance to our efforts to have her appear voluntarily. And we have a choice essentially to take no for an answer, and to say, OK, unlike the Enron executives, unlike the Arthur Andersen executives, unlike others at ImClone, et cetera, who have been required to come and talk to the committee, Martha Stewart gets treated specially. And I don't think we should do that. And that's why I said that we'll probably need to subpoena her, and I think -- I still think that we probably will need to subpoena her.

HEMMER: OK. Listen, there are two things that I want to touch on here. One is this congressional letter. I'll put it up for our viewers to read here, and I'll read from it. And then quoting now: "We are writing to express our grave concerns that Samuel Waksal or others at ImClone may have obstructed the committee's investigation by ordering or carrying out the destruction of certain records and documents."

Is this what many suggest is the obstruction of justice inquiry?

GREENWOOD: Yes. The Justice Department, in its indictment, cited the fact that Mr. Sam Waksal, the former CEO of the company, apparently was involved in the destruction of certain documents. And that became aware to our -- we became aware of that in our committee. And so as a result of that, we have written that letter to ImClone and asked for some more documentation...

HEMMER: OK.

GREENWOOD: ... to make sure that they don't destroy documents.

HEMMER: That's the first thing I want to query about. The second thing is this: If the assistant to the broker, Doug Faneuil, told Martha Stewart by telephone that the Waksal family is selling their shares, what is illegal about that conversation, sir?

GREENWOOD: Well, that's a question for the Justice Department. Inside information law is vague. In fact, one of the reasons that we think it's important to pursue this investigation is because it may lead us to need to change the law to make it very clear what the definition of insider trading is.

But certainly, Ms. Stewart, who was herself a stockbroker, who sits on the New York Stock Exchange board, should be fully aware of the fact that knowledge delivered to you by your broker, who happens to be Sam Waksal's broker, that he is dumping his stock like mad, he's dumping his daughter's stock, is very inside information. That the average stockholder, the average investor, is not privy to, and it is a way of avoiding risk that the rest of the public is exposed to.

HEMMER: Listen, answer this for me. You're going to get e-mail records, you're going to get phone records, you're going to get some sort of paperwork that deals with the transactions before they took place and after they took place. For you specifically, what is the question you need satisfied? What question do you want answered?

GREENWOOD: It's very straightforward. This whole insider trading business at ImClone stemmed from the fact that the Food and Drug Administration had decided that it was about to notify the company that it was not going to review its application for Erbitux, its touted cancer treatment.

The question we have for Ms. Stewart is: Were you aware of that? Did your brokers tell you, or did Mr. Waksal or anyone else, tell you that this was impending? And/or were you aware of the fact that top executives of the company were unloading stock and only stock of their family members? And that's important information.

It's particularly important, because remember, back in June, Ms. Stewart, through her lawyers, wrote to me and to others of the committee to say that she had no such information, and the stock sale was based entirely on a pre-existing verbal order with her broker. And when you set those facts in a letter to the United States Congress, you need to be prepared to substantiate it.

HEMMER: Listen, I'm out of time here. You seem skeptical with just about every answer you are given today. Do you think Martha Stewart broke the law?

GREENWOOD: Well, she is entitled to the presumption of innocence. The thing that I have a difficult time reconciling is if, in fact, she is as innocent as she has claimed in June, why on earth would she go through all of this, having her company lose two-thirds of its value, her personal fortune being diminished significantly, when all she needs to do is come forward and explain what happened?

HEMMER: James Greenwood, congressman from Pennsylvania, thanks for being with us today.

GREENWOOD: Pleasure.

HEMMER: All right.

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