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Martha Stewart Hires Crisis PR Firm

July 3, 2002

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NEW YORK (AP) _ Martha Stewart, whose name and company stock has taken a beating since being linked to the ImClone insider trading scandal, hired a public relations strategist firm in an apparent effort to do damage control.

The decorating maven’s multimedia empire, Martha Stewart Living Omnimedia Inc., hired Brunswick Group, Cindy Leggett Flynn, a senior associate partner confirmed Tuesday. The Susan Magrino agency will continue to do consumer relations and represent Stewart.

Congressional investigators and federal prosecutors are examining whether Stewart had inside information when she sold nearly 4,000 shares of ImClone Systems Inc. Dec. 27, a day before the Food and Drug Administration officially announced it would not review the company’s application for the cancer drug Erbitux.

ImClone’s stock subsequently plummeted. Stewart has made repeated statements that the sale was lawful and was based on public information.

Stewart is personal friends with Sam Waksal, the former CEO of ImClone, who was arrested June 12 on charges of securities fraud and conspiracy for allegedly tipping family members to sell their stock.

In other developments, The Washington Post reported Tuesday that Merrill Lynch & Co. has handed over documents to Congressional investigators on which Stewart’s broker Peter Bacanovic cited the figure ``$60.″ It apparently refers to the price at which he planned to dump Stewart’s stock. Still, congressional investigators do not believe the documents clear Stewart, who had pinned her innocence to the existence of the so-called ``stop-loss order,″ which she said was made verbally.

``We have the document in question, and clearly it is not a standard stop-loss order,″ said Ken Johnson, a spokesman for the House Energy and Commerce Committee, which is investigating the ImClone case.

Casting doubt on the existence of such an order is that Bacanovic’s assistant Douglas Faneuil conceded to Merrill Lynch lawyers that he was not aware of the stop-loss order after all, but was under pressure by Bacanovic to support the claim that one existed.

Furthermore, investigators said there was no way they could verify when the document with the $60 citation was made, according to The Washington Post.

Merrill Lynch announced on June 21 that it had suspended Bacanovic and Faneuil with pay, after discovering discrepancies in their statements.

Richard Strassberg, Bacanovic’s attorney, declined to comment through his spokeswoman Melissa Bensen.

Shares of Martha Stewart Living Omnimedia were up more than 9 percent, or $1.10, closing at $12.60 on the New York Stock Exchange.

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