Part I: The Case
Fraud, lying, conspiracy...not terms that any individual generally wants associated with their history, nonetheless with their reputation and personality, especially if that individual happens to be Martha Stewart. Martha Stewart: a name which almost every person who calls themselves an American can recognize. Her name pronounces itself across cookbooks, magazines and even has its own show on Style and The Learning Channel. It now pronounces itself with yet another captivating theme, as part of one of America's major scandals. Martha Stewart may be America's most famous businesswoman. Considered a "cultural icon" (Byron, 3), she made a name for herself through the fundamentals of home-making. As an expert on home decorating, cooking, gardening, elegant weddings and do-it-yourself crafts, Martha entered the homes of millions of Americans with the 1982 publication of her book Entertaining. Eventually, she turned her book and a small catering business into an empire. By 1999, Martha took her company public on the New York Stock Exchange as Martha Stewart Living Omnimedia. The new company astounded Wall Street with its opening stock rising from $18 to $52, and finally settling at a solid $36. Her once small business, now includes a website, 27 books, two magazines, two TV shows and a partnership with Kmart (Byron, 5-6). However, despite one's wealth, success and fan base, people make mistakes. On December 27, 2001, Martha made one that put her career, her company and her reputation in jeopardy.
The case started with a company called ImClone. ImClone was a hot biotech company in which the owner, Sam Waksal, thought was about to get a lot hotter. With the introduction of a cancer drug called Erbitux, Waksal's company was going to skyrocket or so he thought. The drug had only one stipulation until its success, and that was to pass through the strict eye of the FDA. Waksal thought that the drug's success was in the bag, however, the FDA decided otherwise. On December 20, 2001, the FDA notified ImClone executives that it had reached a decision on Erbitux and that its announcement would be made on December 28, 2001. On December 25, 2001 someone from Bristol-Myers Squibb notified Harlan Waksal, Sam's brother, that the FDA would indeed reject Erbitux in a public announcement three days later. Harlan immediately contacted his brother to warn him of the disturbing news. Maybe it was out of panic or maybe it was sheer disbelief and shock, but something ignited Sam to make a horrific decision; he began calling his friends and family to advise them to sell their shares of ImClone (Slater, 23-26).
A Brief History of Long Friendship
Sam Waksal knew Martha through her daughter Alexis Stewart. He had once dated Alexis despite her being 18 years younger than him. Through Alexis's relationship with Sam, Martha got to know and became close friends with Waksal. Possibly due to her friendship with Sam, in 1999 Martha bought 2500 shares of ImClone at $32 a share. Later, the stock split, leaving her with 5000 shares. In 2000, Martha sold 1,072 shares, leaving her with 3, 928 shares of ImClone (Slater, 12-14). Martha's account was managed by a young man named Peter Bacanovic, a broker for Merrill Lynch. Ironically, Peter was also a close friend of Sam Waksal's. As a former director of business development at ImClone, Sam and Peter knew each other well. Also involved in the relationship circle was Doughlas Feneuil, the assistant to Peter Bacanovic. Feneuil would be the one to find out that Waksal and his family were dumping their shares of ImClone the morning of the FDA's announcement (Steinhaus, 2-3).
The Beginning of the End
So how did Martha Stewart, a power woman, one of the top businesswomen in the country get tangled up in such a debacle? It started with four phone calls exchanged between her and Sam Waksal on December 21, 2001,...