Stewart knew of shares' sale, says friend

A close friend of Martha Stewart has provided the last major link in a chain of evidence the US government hopes will convince jurors in New York that she lied about the home decorating magnate’s sale of ImClone Systems stock.

Mariana Pasternak, whose friendship with the mogul goes back 20 years, testified that Stewart confided to her just after she sold the stock that ImClone CEO Sam Waksal had tried to sell his own shares.

Prosecutors claim Stewart lied to investigators on April 10, 2002, when she claimed she never recalled being told the Waksals were selling before she dumped her own ImClone shares on December 27, 2001.

Pasternak said she had the conversation with Stewart on December 30, 2001, on a terrace at a lush

resort in Los Cabos, Mexico, where they were on holiday.

“I remember Martha saying Sam was walking funny at the Christmas party, that he was selling or trying to sell his stock, that his daughter was selling or trying to sell her stock,” Pasternak said.

She said Stewart added: “Isn’t it nice to have brokers who tell you those things?”

ImClone shares tumbled shortly after Stewart sold her shares on news that the Food and Drug Administration would not review ImClone’s application for approval of its highly touted cancer drug, Erbitux.

While Stewart is not charged with knowing about the drug review, she told investigators in 2002 she did not recall being told anything about Waksal trying to sell.

Waksal, a friend of both Stewart and Pasternak, is serving a seven-year prison sentence for insider trading.

He and his family frantically sold, or tried to sell, their shares ahead of the drug announcement.

Stewart and her broker Peter Bacanovic, who is also on trial, claim they had made a deal earlier in December 2001 to dump Stewart’s ImClone shares if the stock fell below 60. Prosecutors say that was a cover story.

The US government was expected to rest the case against the pair today.

Douglas Faneuil, a young former Merrill Lynch & Co. assistant, has testified Bacanovic ordered him on December 27, 2001, to alert Stewart that the Waksals were trying to sell – then pressured him to cover it up.

And Ann Armstrong, a personal assistant to Stewart, testified Stewart herself altered a computer log of a message Bacanovic left on December 27, then quickly ordered her to change it back.