Congress sends Martha matter to Justice Dept. She won't have to testify before the House, but she could face criminal prosecution over the ImClone insider trading scandal

By Gary Susman
Updated September 11, 2002 at 04:00 AM EDT
Martha Stewart: Theo Wargo/WireImage.com

When Louisiana Congressman W.J. ”Billy” Tauzin appeared on ”Martha Stewart Living” two years ago to promote his Cajun cookbook, ”Cook ‘N Tell,” did he press Stewart for any cleaning tips? Tauzin’s House committee washed its hands of Stewart’s alleged insider trading mess on Tuesday. After a couple months of probing Stewart’s controversial December sale of her ImClone stock, the House Energy and Commerce Committee has passed its findings on to the Justice Department, which is already conducting a probe on the ImClone insider trading scandal.

Tauzin’s committee had complained that Stewart was less than forthcoming, having declined to testify without invoking her Fifth Amendment rights, having waited until the last minute to supply documents surrounding the sale, and finally having submitted partially blacked-out versions of those papers. After wading through the files, Congress found some seeming discrepancies between Stewart’s assertion that ImClone founder Sam Waksal (a Stewart pal) hadn’t tipped her off about the imminent plunge of the stock price, and phone records that seemed to indicate calls between Stewart and Waksal before and after the sale.

Referring to Stewart’s former occupation as a stockbroker, committee spokesman Ken Johnson said in a press conference Tuesday, ”It’s unconscionable that someone can be allowed to serve on the board of directors of the New York Stock Exchange while at the same time vowing to take the Fifth Amendment. What kind of message to America is Wall Street sending?” Still, Congress’ referral to the Justice Department noted that the committee had not reached ”any formal conclusion” that Stewart had committed a crime (she has not been charged with one), only that the evidence warranted a criminal investigation.

Responding to the referral, Stewart’s lawyer, Robert Morvillo, issued a statement, saying, ”I strongly disagree with the analysis of the committee and its staff, but am pleased that the matter will now be exclusively in the hands of professional law enforcement authorities who are trained to conduct a responsible and thorough investigation. I’m glad that the political aspects of this matter will now terminate and am confident that the investigation will lead to Ms. Stewart’s exoneration.”

Wall Street also seemed pleased to hear that Stewart would not have to testify before politicians, but that her fate had been placed instead in the hands of executive-branch lawyers. Shares of Stewart’s own company, Martha Stewart Living Omnimedia, have fallen about 60 percent in price since the scandal broke three months ago, but after yesterday’s press conference, they rose about 17 percent, up $1.30 to $9.05.

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