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American Morning
Federal Prosecutors May be Ready to Turn Up Heat on Martha Stewart
Aired January 27, 2003 - 08:16 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.
PAULA ZAHN, CNN ANCHOR: Federal prosecutors may be ready to turn up the heat in Martha Stewart's kitchen. She has lots of them. A decision is expected in the coming weeks on whether she will be indicted for alleged securities violations. Investigators have been looking into whether Stewart got inside information before she dumped thousands of shares of ImClone's stock. She has refused to talk publicly about the case until now and she sat down with Jeffrey Toobin over a homemade meal. He got an exclusive interview with Stewart in the "New Yorker" magazine.
And Jeffrey joins us now to share some of that with us this morning -- good morning.
JEFFREY TOOBIN, CNN LEGAL ANALYST: Hi.
ZAHN: Based on the investigation you've done on your own and what Martha Stewart told you about her ImClone trades, is she guilty of insider trading?
TOOBIN: I obviously don't have all the evidence that's available to federal prosecutors. But based on what I've seen, this looks like a very weak case against her. And she's been tried in the press...
ZAHN: Why?
TOOBIN: ... but not in court. And she's done badly there.
ZAHN: Why do you say it's a weak case?
TOOBIN: Because the, she has to know, in order to be guilty of insider trading you have to know you're doing something illegal and you have to trade only because of the illegal information that you're given. What I learned in this story is that Martha Stewart had a long-term plan to sell lots of securities during this period of November and December when she sold her ImClone stock. So this wasn't a one time deal.
ZAHN: Did you see written evidence?
TOOBIN: I didn't see written evidence...
ZAHN: Did you see documents showing that?
TOOBIN: ... but I saw corroborating evidence from other people, people who spoke to her about that, you know, people who don't have the same stake in it that she did. ZAHN: Who are these people you spoke with, brokers?
TOOBIN: Her personal business manager. I mean, you know, that's someone who has a...
ZAHN: Well, what would you expect a personal business manager to say?
TOOBIN: Well, but these are people who see the records. If they're lying, they're going to be refuted by the records. I didn't get to see the records, but I mean the records exist. So I don't think they would say the records say X when the records say Y. But obviously the prosecutors have the records themselves, and if they're right, if they're, if these people are lying to me, I'll be found out.
ZAHN: But even you have to concede that the time line of how this all came together looks a little suspicious, no?
TOOBIN: This is an investigation...
ZAHN: Her relationship with Sam Waksal.
TOOBIN: This is an investigation that should be done. This timing is incredibly suspicious. She sells on one day, as does Waksal. The stock tanks the next day. He's clearly guilty of insider trading and he has plead guilty. But the question is is she also? And the facts are different.
Another thing I learned, her defense from the beginning has been she had a plan to sell this stock at $60 no matter what, even though, you know, that this stuff happened.
ZAHN: And that one broker has said that happened after the fact.
TOOBIN: What?
ZAHN: That the plan...
TOOBIN: That's right. Something -- the broker hasn't said that, but the claim is that it happened after the fact. Another person, you know, corroborates that. Bacanovic, the stock broker, corroborates the plan to sell at $60. The personal business manager corroborates the plan to sell at $60. $60 is written on a Merrill Lynch document.
So, true, she could have entered a stop loss order, you know, which would have made this all moot, if she had the sale go through automatically. But her story is corroborated in important ways.
ZAHN: Now, you also had some interesting exchanges with her about how embattled she feels now. This is on the heels of the Christopher Byron (ph) book, where he interviewed a bunch of people who said that she was a horror to work with and he had all kinds of awful things to say about her.
TOOBIN: Right.
ZAHN: And you say she's kind of surprised by all of that.
TOOBIN: Well, she says she's surprised. And she's very careful in her words. But I sense this was a woman boiling with rage about this whole situation. She uses the word, she uses the word, you know, surprised, puzzled. But, you know, I got a real clue at one point when, you know, we sat down to lunch in her kitchen at Turkey Hill and, you know, there were these very thin chopsticks, beautiful chopsticks. I said, "Wow, these are great." And she said, "You know, in China, the higher your social status, the thinner your chopsticks." And then she said, "Well, of course I had to have the thinnest." And then sort of as a joke, but not really, she said, "That's why people hate me."
And so she realizes that her perfectionism has gotten under people's skin. But, you know, it doesn't mean she's guilty of insider trading.
ZAHN: Well, it is certainly easy for any of us to understand how embattled she might feel when she's lost, what, some $400 million...
TOOBIN: She told me this investigation...
ZAHN: ... of her portfolio's value through all this.
TOOBIN: ... this investigation -- and it's not just portfolio's value, it's legal fees, it's lost business opportunities, it's, some of it is real dollars out the door.
ZAHN: If this doesn't end up with any kind of criminal indictment and ends up being a civil case, do you see her being able to rebuild her company and build back the stock value?
TOOBIN: I do think if this case goes away, if she is not found guilty of doing anything, which is really a possibility, I think she can rebuild it. If she's charged, it's all over. I mean they have made an effort to try to distance the company from the person. You know, they started this magazine that says "Every Day Food." It doesn't have Martha's name prominently on the cover.
But she is the asset of that company and if she goes down, the company goes down with her.
ZAHN: Honest opinion now, how was the chicken she made you?
TOOBIN: Fantastic. I have never had a better lunch in my life.
ZAHN: I bet that's true.
TOOBIN: I'm telling you the truth.
ZAHN: Jeffrey Toobin with an exclusive interview with Martha Stewart in this week's "New Yorker" magazine.
Thanks, Jeffrey.
TOOBIN: Sure thing. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Stewart>
Aired January 27, 2003 - 08:16 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAHN, CNN ANCHOR: Federal prosecutors may be ready to turn up the heat in Martha Stewart's kitchen. She has lots of them. A decision is expected in the coming weeks on whether she will be indicted for alleged securities violations. Investigators have been looking into whether Stewart got inside information before she dumped thousands of shares of ImClone's stock. She has refused to talk publicly about the case until now and she sat down with Jeffrey Toobin over a homemade meal. He got an exclusive interview with Stewart in the "New Yorker" magazine.
And Jeffrey joins us now to share some of that with us this morning -- good morning.
JEFFREY TOOBIN, CNN LEGAL ANALYST: Hi.
ZAHN: Based on the investigation you've done on your own and what Martha Stewart told you about her ImClone trades, is she guilty of insider trading?
TOOBIN: I obviously don't have all the evidence that's available to federal prosecutors. But based on what I've seen, this looks like a very weak case against her. And she's been tried in the press...
ZAHN: Why?
TOOBIN: ... but not in court. And she's done badly there.
ZAHN: Why do you say it's a weak case?
TOOBIN: Because the, she has to know, in order to be guilty of insider trading you have to know you're doing something illegal and you have to trade only because of the illegal information that you're given. What I learned in this story is that Martha Stewart had a long-term plan to sell lots of securities during this period of November and December when she sold her ImClone stock. So this wasn't a one time deal.
ZAHN: Did you see written evidence?
TOOBIN: I didn't see written evidence...
ZAHN: Did you see documents showing that?
TOOBIN: ... but I saw corroborating evidence from other people, people who spoke to her about that, you know, people who don't have the same stake in it that she did. ZAHN: Who are these people you spoke with, brokers?
TOOBIN: Her personal business manager. I mean, you know, that's someone who has a...
ZAHN: Well, what would you expect a personal business manager to say?
TOOBIN: Well, but these are people who see the records. If they're lying, they're going to be refuted by the records. I didn't get to see the records, but I mean the records exist. So I don't think they would say the records say X when the records say Y. But obviously the prosecutors have the records themselves, and if they're right, if they're, if these people are lying to me, I'll be found out.
ZAHN: But even you have to concede that the time line of how this all came together looks a little suspicious, no?
TOOBIN: This is an investigation...
ZAHN: Her relationship with Sam Waksal.
TOOBIN: This is an investigation that should be done. This timing is incredibly suspicious. She sells on one day, as does Waksal. The stock tanks the next day. He's clearly guilty of insider trading and he has plead guilty. But the question is is she also? And the facts are different.
Another thing I learned, her defense from the beginning has been she had a plan to sell this stock at $60 no matter what, even though, you know, that this stuff happened.
ZAHN: And that one broker has said that happened after the fact.
TOOBIN: What?
ZAHN: That the plan...
TOOBIN: That's right. Something -- the broker hasn't said that, but the claim is that it happened after the fact. Another person, you know, corroborates that. Bacanovic, the stock broker, corroborates the plan to sell at $60. The personal business manager corroborates the plan to sell at $60. $60 is written on a Merrill Lynch document.
So, true, she could have entered a stop loss order, you know, which would have made this all moot, if she had the sale go through automatically. But her story is corroborated in important ways.
ZAHN: Now, you also had some interesting exchanges with her about how embattled she feels now. This is on the heels of the Christopher Byron (ph) book, where he interviewed a bunch of people who said that she was a horror to work with and he had all kinds of awful things to say about her.
TOOBIN: Right.
ZAHN: And you say she's kind of surprised by all of that.
TOOBIN: Well, she says she's surprised. And she's very careful in her words. But I sense this was a woman boiling with rage about this whole situation. She uses the word, she uses the word, you know, surprised, puzzled. But, you know, I got a real clue at one point when, you know, we sat down to lunch in her kitchen at Turkey Hill and, you know, there were these very thin chopsticks, beautiful chopsticks. I said, "Wow, these are great." And she said, "You know, in China, the higher your social status, the thinner your chopsticks." And then she said, "Well, of course I had to have the thinnest." And then sort of as a joke, but not really, she said, "That's why people hate me."
And so she realizes that her perfectionism has gotten under people's skin. But, you know, it doesn't mean she's guilty of insider trading.
ZAHN: Well, it is certainly easy for any of us to understand how embattled she might feel when she's lost, what, some $400 million...
TOOBIN: She told me this investigation...
ZAHN: ... of her portfolio's value through all this.
TOOBIN: ... this investigation -- and it's not just portfolio's value, it's legal fees, it's lost business opportunities, it's, some of it is real dollars out the door.
ZAHN: If this doesn't end up with any kind of criminal indictment and ends up being a civil case, do you see her being able to rebuild her company and build back the stock value?
TOOBIN: I do think if this case goes away, if she is not found guilty of doing anything, which is really a possibility, I think she can rebuild it. If she's charged, it's all over. I mean they have made an effort to try to distance the company from the person. You know, they started this magazine that says "Every Day Food." It doesn't have Martha's name prominently on the cover.
But she is the asset of that company and if she goes down, the company goes down with her.
ZAHN: Honest opinion now, how was the chicken she made you?
TOOBIN: Fantastic. I have never had a better lunch in my life.
ZAHN: I bet that's true.
TOOBIN: I'm telling you the truth.
ZAHN: Jeffrey Toobin with an exclusive interview with Martha Stewart in this week's "New Yorker" magazine.
Thanks, Jeffrey.
TOOBIN: Sure thing. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Stewart>
