Free Tangled Webs by James B. Stewart

ImClone,” but he “didn’t tell her whether he had been asked any questions or whether any of the questions involved her at all.”
    Stewart also volunteered that she’d discussed the ImClone trade with her bookkeeper Heidi DeLuca, who also remembered that Stewart had an agreement with Bacanovic to sell ImClone at $60. “All three of them–Mr. Bacanovic, Ms. DeLuca and Ms. Stewart–all had the same recollection,” Stewart said.
    But how could she know Bacanovic’s recollection if she’d only had one conversation with him–one that didn’t mention her trading?
    Schachter pounced on the inconsistency, and Stewart hastily tried to recover. “Well, I don’t know what his recollection is. I only know that my bookkeeper and I have the same recollection.”
    The obvious gaffe seemed to put Stewart on edge. “Can I go now?” she testily asked. “I have a business to run.” Shortly after, she ended the interview. She and her lawyers left the room, the atmosphere strained.
     
     
    T he government lawyers were baffled by Stewart’s performance. On the one hand, she didn’t say anything incriminating. Her story was consistent with their phone interview with Bacanovic; she knew nothing about the FDA’s decision on Erbitux and had sold because the stock dropped below a prearranged target of $60. And yet her story suffered from the same weaknesses. There was no stop-loss order, and Stewart had been unable to recall even one other instance where she’d made such an arrangement to sell a stock. She had sold her entire position the day before a major public announcement, which remained highly suspicious. And then there were the curious inconsistencies: the lawyers knew that it was Faneuil, not Bacanovic, who took the order and spoke to Stewart that day. But when pressed on the issue, Stewart insisted she’d spoken to Bacanovic and didn’t even know Faneuil’s name. Why would she lie about Faneuil? Moreover, too much of her story was self-serving: the convenient alibi from the bookkeeper; the claim that she would “never” trade on improper information. And then there was her gaffe about Bacanovic supporting her story, when allegedly she’d never discussed the investigation with him. As she was represented by some of the finest lawyers in the country, it was little short of incredible.
    Given Stewart’s performance, Schachter thought it essential that they question Bacanovic again–as soon as possible, and this time under oath. At four-thirty that afternoon, the SEC issued a subpoena calling for Bacanovic to appear on February 6, just two days later. Merrill’s lawyers managed to put it off a week.

     
    P eter Bacanovic arrived at the Woolworth Building’s ornate, vaulted lobby on February 13, 2002. He was dressed in an expensive, well-tailored dark suit, white shirt, and tie. His thick hair was carefully groomed. He had the polished, affluent look of the successful Manhattan stockbroker he was.
    Bacanovic was accompanied by Marcus, the Merrill Lynch lawyer. The two took the elevator to the sixteenth floor, which was serving as the temporary offices in New York for the Securities and Exchange Commission.
    Bacanovic and Marcus were shown to room 16042, where they were greeted by three SEC lawyers: Glotzer, Slansky, who’d earlier interviewed Bacanovic on the phone, and Laurent Sacharoff, a young lawyer in the office.
    “Do you promise to tell the truth, the whole truth, and nothing but the truth?” Slansky asked him.
    “I do,” Bacanovic replied.
    Jill Slansky began the questioning for the SEC.
    “Let’s go to December 27,” she said. “Let’s start when you woke up that morning . . . as much as you can recall the specifics of conversations with Aliza Waksal, Alan Goldberg [Waksal’s accountant], Sam Waksal, Martha Stewart, Doug Faneuil, and anyone else who was attempting to sell ImClone stock on that day.”
    Bacanovic was poised and exuded self-confidence. He hadn’t traded any ImClone shares for