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Sam Waksal to pay $800,00 fine, settles charges with SEC

Sam Waksal will pay $800,000 and agree not to serve as a director or officer of a publicly held company. In a surprise move, Sam's daughter Aliza, who was previously described as a "tippee" is no longer described as a tippee but rather as a recipient of information from the true tippee, her father Sam Waksal. According to a Wall Street Journal reporter, the settlement appears to exonerate Aliza from previous allegations of insider trading. All charges regarding Waksal's family members have been stayed.

This is very significant because Martha Stewart is rumored to be the "tippee" in a filing against Merrill Lynch assistant broker Douglas Faneuil. Using the same logic now being applied to Aliza, Martha would no longer be considered a "tippee" even if it is found that either Sam Waksal or broker Peter Bacanovic provided her with any information. Under this definition, they would be the tippees, not Martha. Sam Waksal's risky legal strategy in which he sought to protect his daughter and father from prosecution appears to be paying off. Let's hope it pays off for Martha.

Is the media confused about insider trading law, or do they just enjoy acting like bullies?
One of the key elements of insider trading is fiduciary duty. According to the SEC's original filing against Sam Waksal: "At the time of the transactions and events alleged in this Complaint, Waksal was ImClone's CEO, and therefore owed a fiduciary duty to ImClone and its shareholders. As a result, Waksal had a fiduciary duty, among other things, not to trade while in possession of material non-public information and to keep material non-public information confidential."

Sam Waksal's daugher Aliza had no such fiduciary duty. Neither did his father. And neither did Martha Stewart. It appears now that investigators knew this all along, and were just using the charges against Sam's family members as leverage to get Waksal. Now they have him, and in spite of the media pundits at FOX News calling for more Martha bashing, it's time to move on.

Waksal to pay $800,000 fine-- WSJ
ImClone Inc. founder Sam Waksal agreed to pay $800,000 and be barred from acting as officer or director of public company in a partial settlement with the Securities and Exchange Commission. However, the agency also brought new insider-trading charges against Mr. Waksal.

The SEC has claimed Mr. Waksal was tipped off before the government announced a disappointing decision on ImClone's cancer drug Erbitux, tried to sell 80,000 shares of the company and told his daughter to sell all of her ImClone stock.

Burns says journalists have lied about Martha and covered up the "secret" Martha who is "coarse and foul-mouthed and vituperative"

"...in publicizing her as much as they have over the years, journalists have perpetrated a hoax. It is as if they had touted an atheist for his spiritual values, a fat man for his weight-loss program, an alcoholic for his praise of abstinence." --Eric Burns, Fox News

Fox News reporter Eric Burns responded in his column (A Media-Enhanced Stewart) to a question we recently posed in a Washington Post article: Why don’t the people who dislike Martha Stewart so much just ignore her?"

According to Mr. Burns, it's because the journalists who wrote nice things about Martha all these years were lying to us. They were covering up all the bad things they knew about Martha, and they now feel very bad about not telling us the truth. According to Eric Burns, it is now redemption time, and those same journalists who lied to you and me before are now about to go after Martha Stewart with a vengeance. According to Burns:

"Martha Stewart is selling refinement, and she is herself coarse and foul-mouthed and vituperative. Her very fame is, in other words, so hypocritically based that it is a joke played not only on Stewart's many fans, but upon the journalists who have for so long fed those fans such a sanitized image of the woman."

I have two questions:

Question One: Who are these journalists ,Eric? We want their names, which you so conveniently left out of your article. Or do these journalists really only exist in your mind? Isn't the real issue that you "fair and balanced" male journalists only report when women act like "bitches" but not when men act like a mad dog in heat? Isn't the real issue that there is a double-standard?

We know one journalist who agrees, and so do you. His name Neil Cavuto. Neil, who also happens to work at Fox , wrote a piece on Martha Stewart called "Sometimes It's Hard to Be a Woman." Here's some of what Neil said:

"Some people love to hate Martha. Why? I think because she's an easy target: rich, bitchy, hard-driving and a woman. It's funny, we can tolerate those tenacious qualities in a male, but apparently not when it's a female. Why?

"Giants like Bed, Bath and Beyond, or Linens and Things don't generate half the buzz or get a tenth the grief. And they kind of do what Martha does. Good men running them both and pretty tenacious chaps themselves.

"Maybe Martha does bring a lot of this on herself. She's ruthless, aggressive and takes no prisoners. These are qualities we admire in big muckety-mucks. Unless, of course, those big muckety-mucks aren't wearing a tie."

So Eric, is Neil Cavuto wrong to say that there is a double standard in the media that penalizes strong female executives? Have you ever written such a bitchy piece about any of these men? Don't answer. The answer to both questions is an emphatic no.

Question Two: Eric, If these journalists were lying to us before when they were building Martha up, why should we believe them now when they are bringing Martha down? Why should we believe you?

Just a few months ago, Eric Burns published an article lambasting the media and the public for the attention they pay to celebrities and their personalities and private lives. The title of the article: Journalism panders to viewer bad taste. Burns called viewers who watch these celebrity reports a "blight on society," and whacked the media for running these stories. Now he's calling on journalists to reveal what they know about Martha Stewart's personality and private life. But you can't have it both ways Eric. Pick a position and try to stick with it for at least a few months. That may help restore a modicum of credibility.

The Tabloid Terrorsts just dont get it
What Eric Burns does not realize is that Martha's fans do not believe these stories, nor do they care. Martha's fans like the quality of her products, her show and magazine. If you drive a Mercedes, and someone says the head of Daimler-Chrysler is a bad guy, do you switch to a Honda because Japanese people are more polite than Germans? Martha's fans have stayed loyal in spite of journalists like Burns and Byron raking her over the coals, and that seems to be driving them crazy. But that's a conversation these writers really should have with their shrinks, not with their readers.

Sam Waksal, art dealer Larry Gagosian the hot topic at NY Armory pier show

The whispering you hear at the Armory Show on the pier this weekend isn't about Kurt Kauper's Carey Grant nude at the Deitch Projects booth, or about Hairspray creator John Waters hiding from all the pesky fans. All the talk is about the raid on Larry Gagosian's gallery which resulted in Sam Waksal's latest guilty plea on tax evasion. One former Gagosian assistant told us investigators swooped down on the uptown gallery unannounced, and seized sales records, to the great surprise of all the underlings. The gallery even had to put the phone system on "night" while the feds collected evidence, so no calls could get through all day. Several dealers told us sales tax avoidance has been going on for years, but since Tyco's ex-CEO Dennis Kozlowski was caught the DA has been cracking down. No word on who will be charged next, but investigators have already collected over $6 million in unpaid sales tax, which the city desperately needs. Now that sounds like a good thing for prosecutors to spend their time on.

Join the SaveMartha Book club:

Deconstructing Byron, by Andrew Ritchie – Vol. 10: How to Negotiate a Contract
Greed. One of the seven deadly sins. According to Chris Byron it was greed that spurred Martha ever forward in her business pursuits. It was not ambition or an inner yearning to accomplish something worthwhile. It was not a desire to create a product and share ideas that would be inspiring to millions of people. No, it was greed. In chapter 9 of “Martha Inc.” – How to Negotiate a Contract (a title dripping with sarcasm) – it is Martha’s greed that takes center stage in Byron’s ludicrous drama. (Read More)

Feds Should Put Up or Shut Up on Martha--TheStreet.com
By James J. Cramer
Is there anything worse than being prosecuted by the federal government for securities fraud?

How about waiting for the feds to prosecute you for securities fraud?

That's how I feel about Martha Stewart and her company, Martha Stewart Living Omnimedia. Had Martha Stewart been charged and pled guilty to something, she and her company would be in infinitely better shape than the limbo they find themselves in now. They are in the worst of all possible worlds: They haven't been charged, so they're not able to defend themselves. And throughout this limbo period the company's biggest asset, Martha Stewart, is playing with both hands tied behind her back because the press has convicted her even as the government hasn't even charged her.

Martha Stewart Company Posts First Loss and Blames Inquiry--NY Times, by CONSTANCE L. HAYS
Martha Stewart Living Omnimedia reported a loss of 3 cents a share from continuing operations yesterday for the fourth quarter, its first quarterly loss since becoming a public company three years ago. The company attributed its poor showing to the effects of the government's investigations into Martha Stewart's stock trading.

Some See Excess In Stewart Stories--Newsday
In an era of corporate scandals, the media attention surrounding allegations that Stewart engaged in insider trading of her stock in drugmaker ImClone Systems Inc. has rivaled and sometimes exceeded that given to charges against executives at Enron Corp., Tyco International, WorldCom Inc. and others. The avalanche of news stories and photographs, particularly last summer, and the prominence given to even minor developments in the unfolding saga have caused journalism experts to question the resulting media frenzy.

What a Week!
It 's been quite a week so far, and its less than halfway over. Monday, Sam Waksal revealed in court that he has not provided any information to prosecutors which would advance their insider trading case against Martha Stewart. Sam also refused to accept any charges which would impact his father and daughter, potentially saving them both from prosecution. Instead, Waksal was forced to plead guilty to tax evasion charges on art purchases, a quid pro quo that helps prosecutors save face. But without Waksal, the Feds case against Martha iseven weaker than it was before. Tuesday, Martha announced Q4 results that show a company weathering the perfect storm of a down economy and a mass media scandal. In a market that just reached a 5 month low, MSO was down 4%. For perspective, Chysler, which decided to go with Celine Dion instead of Martha as their spokesperson, was also down 4%, is near a 52 week low and is sinking lower. Meanwhile, MSO cash and investments grew $38 million to $179 million in 2002. In spite of all opposition and adversity, the brand and company are alive and well. What else is in store for us this week? Stay tuned...

Is The End Near?
Martha hinted Tuesday that a legal resolution to her case may be at hand. It may not be time to bake a cake in celebration just yet, but let's get ready by brushing up on our skills with one of Martha's favorite cake recipes: Coconut Layer Cake!

Martha Stewart Says Legal Resolution Near--Reuters
Domestic tastemaker Martha Stewart, the subject of two insider trading investigations, said on Tuesday she was "increasingly hopeful" that questions about her legal situation will soon be settled.

"Although I am increasingly hopeful that my personal legal situation will be resolved in the near future, it is still inappropriate for me to discuss anything relating to them on this call," Stewart said during a conference call with analysts.

Waksal Scandal claims another victim
NY Times says Larry Gagosian is art dealer involved in tax scheme
Meanwhile the Sam Waksal sales tax/art scandal is threatening to bring down one of my favorite art dealers. Larry Gagosian, who is the #1 dealer in NY, has been named in the NY Times as the unindicted co-conspirator who helped Sam save $1.2 million in sales tax on a collection of Rothkos, Bacons, Twomblys, Clementes...Gagosian's clients are just about everyone, including David Geffen, Charles Saatchi and S.I. Newhouse....It's too bad because Larry throws a great party (my photographer friend Tom took me to a one in SoHo where Larry had flappers dancing in cages. It was amazing.). But Larry evidently has some bad karma from displaying one of Damien Hirsch's cows, which was sliced into 7 sections and suspended in formaldehyde. I'm sure many Hindus are celebrating today...
ImClone Founder Admits Evading Taxes on Art --NY Times
Samuel Waksal Pleads Guilty To Evading Taxes--WSJ

Martha Stewart’s empire still suffering--MSNBC
Martha Stewart's company’s bottom line is still suffering from the ongoing federal investigation into the sale of her shares in biotech firm ImClone Systems that have persisted since last summer. A spokesman for the New York federal prosecutor’s office told MSNBC.com Monday that the Stewart investigation is continuing, but declined to comment on reports that enough evidence had been compiled to charge her.

Martha Stewart, Hot Potato--Businessweek
When the insider-trading scandal is resolved, the homemaking queen may find that keeping a lower profile serves her empire best of all
For Martha Stewart, it was a rare mea culpa. In a February "Ask Martha" column in her Martha Stewart Living magazine, she said readers could safely reach into a garbage disposal if the power was turned off. She later "clarified" the advice, warning that putting a hand into such machines at any time is always a bad idea. If only she could issue a clarification to undo the damage from her now infamous sale of shares in ImClone Systems (IMCL ) in late 2001.

Already facing 65 years in jail, Sam Waksal was charged today with tax evasion on purchases of artwork. In spite of hints that significant new charges in the insider trading case were coming, nothing new was announced to resolve either Sam Waksal's or Martha Stewart's involvement in the case. Commentators, including one on Bloomberg Radio, have begun to question whether US Attorney James Comey is using his resources wisely. The same can be said of the media. Over 20 reporters waited for two hours in the bitter cold outside the US Courthouse in lower Manhattan today expecting a big break in the case. Instead, all they got was a fleeting shot of Sam Waksal rushing to a waiting SUV as he emerged from the courthouse, and more grandstanding from prosecutors now looking for more charges to pile on.

The good news is that according to Reuters, Sam Waksal has provided information to prosecutors about other people in the insider-trading investigation, but those did not include Martha Stewart, his lawyer Mark Pomerantz said. So if Sam is not saying he provided Martha with inside information, the focus must now shift back to Martha's broker Peter Bacanovic. The problem is that this makes the government's case much weaker, since information provided by Martha's broker that Imclone was headed lower is much different from a tip from a company CEO that bad news is coming. If anything, Martha's case grew much stronger today. Is it time to get the real bad guys yet?

ImClone Founder Pleads Guilty to Avoiding Sales Tax--NY Times

Forget Martha's woes, bet on her stock--The Globe and Mail
By AMANDA LANG

Stock markets may hate uncertainty but brave investors should love it. Uncertain is the best way to describe immediate prospects for Martha Stewart, as allegations against her of insider trading and obstruction of justice linger on. But prospects are better for her company, Martha Stewart Living Omnimedia Inc.,which trades in New York under the symbol MSO. One needn't confuse the two. The current perception that what ails Ms. Stewart ails her company creates opportunity for investors willing to stomach a bit of risk.

The company reports its fourth-quarter and full-year results tomorrow, and share profit of 3 cents is anticipated for the three-month period. The results are expected to reveal a company suffering from an economic slowdown, and an ailing retailer -- but one still very much on solid ground.

Red Herring, the magazine being sued along with Martha, Inc. author Chris Byron for libel, has folded. The magazine closed up shop this week, laying off 30 staffers. That's bad news for Byron for two reasons: no more assignments from Red Herring, where he was a contributing editor, and since the magazine is now kaput, there will likely be fewer lawyers around to help him fight the libel suit.

The lawsuit focuses on an article called The Peril of penny Stocks which Byron wrote for the mag about Imagis, a Canadian software firm which claims they were libeled by his story. The Supreme Court of British Columbia just ruled the company's libel suit can proceed, with legal costs to be paid to Imagis by Chris Byron and the magazine. All indications are that the lawsuit is moving forward. But who will be paying the lions share of the legal costs now remains to be seen. If Chris Byron decides it's time to use his considerable talents for good instead of for you-know-what, we have an opening for him as a staff writer right here at SaveMartha.com. Mr. Byron, we can guarantee if you help us Save Martha, it would be a good thing!

Publisher Decides to Close Red Herring Magazine --Dow Jones

Canada.com reports that Red Herring magazine and Chris Byron have lost the first round of a libel lawsuit about an article written by Chris Byron, the author of Martha, Inc. The suit was filed by Imagis Technologies which claims it was libeled in a Byron article entitled "The perils of penny stocks." The Supreme Court of British Columbia has ruled the company's libel suit against Chris Byron and Red Herring magazine can proceed, and the legal costs must now be paid to Imagis by Chris Byron and the magazine.

In a bizarre turn in the case, Chris Byron claimed that his phone records relating to sources used in his article had been stolen from AT&T, alleging Imagis had something to with the theft. Imagis has denied any involvement. But Byron may have picked on the wrong company this time. The Chairman of Imagis is Oliver "Buck" Revell, the former Associate Deputy Director of the FBI and chief of counterterrorism.

Byron's better known work Martha, Inc. has lately slid from the bestseller list to the less-seller list, but a paperback version is due out in April just in time for the TV movie. If you really need birdcage liner and are all out of NY Posts, go ahead and pick up a copy: Chris Byron's legal team can use the cash now.

Perfect Enough Amazon sales ranking: 1573		Backfire Amazon Sales Ranking: 677
The same phenomenon that made Chris Byron's savage biography Martha, Inc. become a national bestseller is at work again in the case of HP CEO Carly Fiorina. Mercilessly attacked by critics as underqualified after taking over at HP, she then pulled off a huge merger with Compaq while fighting off a failed board coup by HP heir Walter Hewlett. In spite of her achievements, Carly has been attacked for everything from her choice of wardrobe and polished image to her use of Corporate jets. Misogynists tend to personlize their attacks, vilifying their enemies, rather than looking into why a perfect stranger elicits their own prejudices. These women-haters feelings stem from many sources, from not being breast fed as a child by their unloving mothers to jealousy over anyone who knows more about window treatments than they do. But misogyny sells. The proof is in the pudding: the anti-Carly book Backfire is ranked 677 on Amazon, while the pro-Carly (and anti-Walter Hewlett) Perfect Enough is ranked only 1573. Perhaps if Amazon gave away free pacifiers with every purchase of Byron's book they'd sell even more.

SaveMartha Week In review

Week 36 of the Scandal that Wouldn't Quit started off with a sighting: Martha's broker Peter Bacanovic at a party on Monday night, in the Village at Valdino’s West....with friends Bobby Short, Susan Fales-Hill, and columnist Liz Smith...and Peter looking very relaxed indeed.

Tuesday came a call from Bloomberg attorneys, requesting we delete a bogus news release we had quoted which was posted on the web and was causing some confusion. Luckily nobody seemed to pay it much attention anyway. We immediately put it in the Cuisinart on liquefy. In spite of a weak Monday and Tuesday with shares down 7%, MSO eventually gained 7% off Wednesday's lows.

Thursday came a report that Martha had reduced her holdings in her company to 61.4 percent from 69.1, leftover news as the sale had happened a year earlier. Martha is setting up the next strategic phase of her company, with senior management taking over a bigger role, and new investors coming in, moves very possibly leading to Martha taking her company private, away from the madness of the stock market.

Also on Thursday a bit on Martha selling her unoccupied West Village apartment to NY Met owner Fred Wilpon. We never liked the place anyway. Driving by The Fishbowl this morning while out on an errand, I noticed it still looks like a very disorganized construction site, with big piles of debris outside each tower, even though the NY Post reported Nicole Kidman and Calvin Klein reside there. Hope Nicole and Calvin have good hard-hats. It's a mess!

Friday, Valentines Day, a great article in Businessweek saying what we have said all along: Martha's company will survive. Her products are still flying off the shelves, and consumers just don't care about the scandal. BusinessWeek predicts that no matter what happens now, the company has weathered the storm, continues to introduce great products such as Everyday Food, and is positioned for a healthy future. Martha's expansions in Japan, Canada and other global markets is icing on the cake, gravy on the turkey, sauce on the goose.

On Valentines Day we had fun with the Love Calculator, and noticed Martha's ex-husband Andy Stewart scored very low indeed, only 28%! Sorry Andy, looks like Martha made the right choice after all, especially after that little episode with the garbage can in the dining room after Christmas dinner... Save Martha!

MARTHA STEWART SPEAKS--The New Yorker

After seven months of silence since the infamous Jane Clayson cabbage chopping interview on CBS, Martha speaks out in an interview with Jeffrey Toobin in this week's New Yorker magazine. She is both candid and combative, and is clearly confused about why she has received so much negative press coverage. The interview was granted out of her frustration with the media, which we at SaveMartha clearly share. Whether the interview helps or hurts Martha's case remains to be seen.