Opinion ID: 792809
Heading Depth: 4
Heading Rank: 1

Heading: the investigation begins

Text: 22 On December 28, 2001, the day following Stewart's ImClone sale, ImClone announced that the FDA had rejected its application for Erbitux approval. When the market next opened, on December 31, 2001, ImClone's stock price had dropped approximately 18 percent to $45.39 per share. Prompted by these developments, Merrill Lynch compliance personnel reviewed ImClone trade data preceding the announcement. Upon discovery of the sales by the Waksals and Stewart — all clients of Bacanovic — the matter was referred to Merrill Lynch senior management, who directed further inquiry. 23 Merrill Lynch compliance personnel contacted Faneuil and Bacanovic on December 31st with questions about the ImClone trades. Bacanovic, who was still out of town, told Merrill Lynch administrative manager Julia Monaghan that Faneuil handled the trades. He also said that Stewart's sale was part of her planned year-end tax loss selling. Monaghan then sought out Faneuil. Immediately after speaking with Monaghan, Faneuil called Bacanovic to confirm the accuracy of an answer he had given to Monaghan. Bacanovic, as though coaching Faneuil, repeatedly stated that Stewart's trade was made pursuant to a pre-existing plan for year-end tax loss selling to offset gains in other investments. Faneuil knew, however, that the timing of the ImClone sale and its gain to Stewart were inconsistent with a tax loss strategy.