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June 17, 2002
ImClone scandal hits Martha Stewart stock
NEW YORK (AP) -- Questions over Martha Stewart's ties to the former head of troubled biotechnology company ImClone Systems Inc. prompted one major investment bank to take her media company off its buy list.
On Friday, Merrill Lynch, the nation's largest brokerage, downgraded shares of Martha Stewart Living Omnimedia Inc. from "buy" to "neutral" based on published reports that federal prosecutors are investigating whether the doyenne of domesticity had received insider information from Sam Waksal, a personal friend and the former chief executive of ImClone before she sold her shares of the company in late December.
"We have no knowledge of whether Ms. Stewart committed any improprieties," Merrill Lynch analysts Karl Choi said Friday in a report. "However, the continued scrutiny, especially in the current environment with increased emphasis on corporate governance, is likely to cause extra volatility in (the) shares, until more clarity emerges."
Waksal was arrested last week on charges of insider trading for allegedly trying to sell his stock and tipping off family members after learning the federal Food and Drug Administration would refuse to review the company's application for a promising cancer drug.