Return to Transcripts main page

American Morning

ImClone Finger Pointing

Aired August 15, 2002 - 09:42   ET

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

BILL HEMMER, CNN ANCHOR: You know about ImClone. That's the troubled biotech firm suing its cofounder now and former CEO Sam Waksal for seven million dollars. The company says he was paid the money after he was fired by the board of directors. Waksal was forced out under suspicion of insider trading. Follow along now. His friend Martha Stewart has been swept up in a storm of suspicion for weeks now, investigators looking into the role that Stewart's broker at Merrill Lynch may have played in the matter, but he is now blaming his assistant.
Josh Chaffin is with me now, the reporter for the "Financial Times" who first got wind of the broker's story this past week.

Good morning to you.

We are going to try and make this understandable for our viewers. Essentially, this story is becoming a he said-he said.

JOSH CHAFFIN, "FINANCIAL TIMES": Well, it's actually becoming a he said-he said-she said to be more exact. it looked like a very open and closed case a couple weeks ago. You remember, the Justice Department, Congress, et cetera, were looking into whether or not Martha Stewart had inside information when she sold these shares.

There was also all sorts of circumstantial evidence. Martha sold shares the day before the FDA made a crucial announcement about the cancer drug that this company was developing, then they went back and found all sorts of phone records linking Martha to her broker back Peter Bochanovich (ph), and the broker's assistant Doug Faneuil (ph) that day.

Now the trick comes in, when they begin to look at records, what was actually said during the phone calls, because that is where things become confusing.

HEMMER: OK, let me ask you some things, because you are reporting now that Doug Faneuil, the assistant to the broker, Bochanovich, apparently now has turned and gone to authorities, gone to federal investigators, and is saying his story. Why is it then that the government appears to be listening to this guy?

CHAFFIN: Well, we -- for one thing, it seems Doug would have least to gain from any sort of insider trading in this case. But we understand that Doug has told authorities that he, under orders from his boss, told Martha Stewart -- called her the day that trade was made, said "the chief executive of company, his family is selling their shares, you should you sell your shares," and then went ahead executed the trade. And Mr. Bochanovich's (ph) response is that he certainly had no knowledge of Doug passed that inside information, along that in any event, he wouldn't have directed him to do so.

HEMMER: In any event, what if Doug talks to Martha Stewart and says, hey, the Waksals are selling their shares. Is that illegal?

CHAFFIN: That is where thing get very murky, because, it is possible, that Bochanovich (ph) could have said, call Martha, tell her sell, and it's possible that they kid said too much by mistake, by accident, whatever else. We have no idea, but the other question that is very interesting in this case that I think is often overlooked is that if Martha sold because she knew that these insiders were selling, that's not necessarily insider trading. Now if she sold because she knew that the insiders were selling, and she knew that the insiders were aware that the FDA was going to reject the drug, that is why she was selling, that probably is.

So I think what it comes down to, is in any event, it's probably difficult for the government to bring a case, unless they come up with something else.

HEMMER: Insider is really tough to nail somebody on.

CHAFFIN: It is.

HEMMER: And a lot of times, and possibly in this case, I don't know. But possibly they go to another charge of obstruction of justice.

CHAFFIN: Right.

HEMMER: If that's the case then, how does that apply here.

CHAFFIN: They are looking at obstruction of justice. When they interviewed Martha and Peter originally in January, their explanation was that they sold the shares because they had a previous agreement if ImClone hits 60, then they would sell her shares.

Now, things became interesting in June, Fanuiel (ph) retained a lawyer himself, went back. He had initially backed the story, and then he went and said, actually, I'm going to change my testimony and not really -- I wasn't aware of this agreement.

Now the counterargument to that is that Mr. Bochanovich (ph) and Martha apparently had this agreement in a phone conversation late in December from what we've learned, and if that's the case, then Doug would not have been aware in any event, and apparently he may have actually been on vacation when that conversation took place.

HEMMER: He said, he said, she said, and he said once again. We'll see if it all adds up in the end, but it continues to percolate out there, and it's a big question, an outstanding issue as to who the government believes in terms of the stories,.

Thanks, Josh. Josh Chaffin with us, wrote the story for "Financial Times." CHAFFIN: Thank you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com