Posted 1:57 AM by Robert

Savaging Martha

UPDATE: The New York Daily News writes that Mr. Bacanovic has offered to testify only if he given immunity. That would be a nice deal for him - especially if the deal only requires that he tell what he knows, and does not actually require him to incriminate anyone (that is, Martha Stewart). In that case, he could just reaffirm his already-told story. And he should be sure to say a lot, because under current federal law, he could essentially make it impossible for the prosecution to convict him with any evidence at all from whatever source just by making his testimony broad enough to taint every relevant fact. Could the prosecutors be silly enough to fall for that?

If a deal did require him to incriminate Ms. Stewart (or anyone else), a jury would probably seriously consider disregarding the resulting testimony. The recent refusal of the Andersen jury in Houston to accept that David Duncan even committed the crime to which he had confessed under similar pressure shows just how skeptical juries are of testimony obtained through such new-age torture techniques.

Of course, what is really strange about the prosecution's fixation on Ms. Stewart is that SHE IS NOT THE BIG FISH, regardless of whether she sold on insider information. If clear evidence of her guilt appears, then of course she should be prosecuted. But unless the government has indications that Ms. Stewart has done this kind of thing often before (and there have been no reports of that) it is just a ridiculous waste of time and public money for the prosecution to be making heroic efforts to bring her down as if she were some kind later-day Joe Bananas.

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Martha Stewart is now, of course, under considerable pressure for her December 27, 2001 sale of about $250,000 worth of ImClone stock. The Man Without Qualities does not know Martha Stewart or whether she will ultimately be exonerated of the suspicions against her. However, if the state of the evidence in this matter is accurately reflected in the media, the hostility being cultivated against her is far from justified at this time.

As things are reported by the Wall Street Journal to stand now, Ms. Stewart and her broker, Peter Bacanovic each say that the ImClone stock in Ms. Stewart's account was subject to an oral $60 "stop loss" order. Such oral orders are really not rare with very wealthy people. Unless one of them changes that story, there is no material risk that either of them will be exposed to a charge of "obstruction of justice" or "insider trading" on account of Ms. Stewart's trades. Moreover, while reporters can write about an "expanding investigation," that Douglas Faneuil (Mr. Bacanovic's sales assistant) now doesn't support the existence of the oral stop loss order, and the assistant's reported assertion that Mr. Bacanovic "pressured" him - it will take quite a bit more than any of that to put Ms. Stewart in real danger. If Mr. Bacanovic "pressured" his assistant to lie, that could be a problem for Mr. Bacanovic. But it is not surprising that he would want his assistant to back him up if the "stop-loss" story really happened exactly the way Mr. Bacanovic said it did. So the "pressuring" doesn't add a lot of information with respect to Ms. Stewart. A more relevant enquiry - but one that to my knowledge has not been reported - is whether Mr. Bacanovic can cite to any other cases of his accepting oral "stop-loss" orders which he did not enter in the Merrill computer. Since Mr. Bacanovic is reported to have had a good number of Park Avenue set clients, he may be able to come up some such unentered orders.

Nor does the supposed "discrepancy" in the Bacanovic/Stewart versions of the "stop-loss" order, where she says the order was placed in November but he says December 10, amount to a hill of beans. If the two of them had invented the "stop-loss" order, why couldn't they agree on the date? Ms. Stewart is not exactly known as someone who has trouble with details. This "discrepancy" if anything suggests they did not invent the "stop-loss" order after the fact. Further, the e-mail that started the whole chain of events was sent on December 24 - two weeks after the last date both of them agree the "stop-loss" was in effect.

Nor does Mr. Bacanovic's December 27 telephone call to Ms. Stewart raise serious questions as to her - and it certainly is not inconsistent with the existence of a $60 "stop-loss" order. Some people (especially Congressional staffer Ken Johnson) have suggested that it would be strange - and potentially incriminating - if the stock had not yet declined below $60 at the time of the call. That is a real stretch. On December 27 the stock was at best just above $60 - and had been trending downward for weeks. So even if the price had not declined below $60 at the time of the call, Mr. Bacanovic certainly knew it might very well do that during the day - thereby activating the "stop loss." It is not surprising that a broker would call a client to inform her that he would likely be using her prior oral instructions to sell a quarter million dollars of her property during the day. Most people would not be surprised to get a call from their broker under such circumstances. Some people (again, especially Mr. Johnson) have suggested that it is suspicious that the telephone note taken by Ms. Stewart's assistant said that Mr. Bacanovic thought the ImClone stock price would start declining - even though it already had been declining for weeks. But the note is hopelessly ambiguous - as are many notes taken by busy assistants. And accepting Mr. Johnson's suspicion means we are to believe that Mr. Bacanovic would leave insider information that could put him in jail in a secretary's telephone note.

Unless and until some real evidence that Ms. Stewart lied to federal investigators emerges - and nothing meeting that description has percolated up yet - it is hard to understand why the media is so anxious to bring Ms. Stewart down. Worse, it is just outrageous that someone like Ken Johnson - a representative of the congressional committee investigating this matter - is repeatedly shooting his mouth off and raising essentially unfounded hostility towards Ms. Stewart. Nor is it proper that Merrill Lynch officials seem to be feeding their unsupported suspicions to the media on what seems to be an often-anonymous basis.

Perhaps all the people so anxious to savage Martha Stewart on the basis of very thin evidence indeed might keep in mind that by doing so they are throttling the stock price of Martha Stewart Omnimedia, Inc. - a public company. That means a lot of hostile, irresponsible, unsupported speculation has cost a lot of innocent public shareholders a lot of money. Shouldn't there be a few more facts gathered before the demolition begins so much in earnest?

The actions and statements to the media of Ken Johnson - the Congressional committee "spokesman" - have been particularly irksome and gratuitous in this regard. Could he be upset that a Polish-American woman from Nutley, New Jersey who has never pretended to be anything else (despite the carping suggestions of her critics to the contrary) has made out so well all by herself? And this while sad Mr. Johnson has to make do on a Congressional staffer's salary.