Did you know that at one point David Denby owned almost as many shares of ImClone as Martha Stewart? He did. In fact, they had a lot in common. Like Martha, Denby was friends with Sam Waksal, the scientist turned founder of ImClone, developer of the cancer drug Erbitux. “We own colorectal cancer,” Waksal once told Denby over lunch in Soho. “We’ll be a leader in pancreatic cancer. And we’ll be a player in lung cancer.” Like Martha, Denby bought low ($22) and like Martha he tried to sell high, in September 2001, when Bristol-Myers Squibb bought a large chunk of ImClone at $70 per share. But Martha and Denby weren’t the only ones selling, and the New Yorker film critic managed to unload only a few dozen shares; Martha, with the well-connected Peter Bacanovic of Merrill Lynch as her broker, did a bit better. As a result, on Christmas day, 2001, Denby had around 2,000 shares, and Martha 4,000. IMCL was trading on the Nasdaq at $65.
A week later, Denby still had all his shares, Martha had none of hers, and the stock, following a report that Erbitux had been rejected by the FDA, was at $46 and falling. This is why Denby is a sucker, as well as the author of American Sucker, and why Martha is now spending her mornings and afternoons in the dock at the New York District Federal Courthouse in downtown Manhattan.
I began taking the train to the trial earlier this month because I’d gone to high school with the government’s key witness, Doug Faneuil, and because I’d always wanted to see a celebrity defendant face the cameras on the courthouse stairs. Also, in an era when there are “dive bars” in the East Village charging $5.50 for a beer, it’s free.
But day after day it came to seem less like entertainment and more like the crystallization of certain uglier things—a purgatorial mood, a public psychoanalysis of the past ten years. Why is the government prosecuting Martha Stewart, creator of consumer desire for better home aesthetics? “The corporations are building prisons now,” a Save-Martha woman explained when I walked into the courthouse snack room, “and they want to fill them with all the decent people.” So there’s that. But also it’s a form of expiation. “This is how we treat our great writers,” Gorky grumbled after Chekhov’s small sad funeral procession. Well, this is how we treat our great celebrities. And the public’s avenging angel is my old classmate Doug.
Throughout the trial the government’s quasi-metaphysical claim was that Martha, because she was entirely identified with Martha Stewart Living Omnimedia, had artificially kept her MSO stock stable by lying about the ImClone sell-off. She was not actually accused of the insider trading. And yet that was still the dark heart of the case and, with the possible exception of defrocked analyst Henry Blodget, no-one in the courtroom really doubted that Stewart and her broker Bacanovic were guilty of trading on privileged information on December 27, 2001. Doug at the time was Bacanovic’sassistant at Merrill Lynch. Bacanovic was also, as it happens, one of Sam Waksal’s brokers, and was on vacation just then in Florida. Here is the crux of Doug’s testimony, gently coaxed from him by Assistant US Attorney Karen Patton Seymour, the attractive, small-voiced lead prosecutor:
Patton Seymour: Directing your attention to December 27 … when did you arrive at the office that day?
—What time does the market open?
—What happened that day?
—I got calls from Alan Greenberg, Sam Waksal’s accountant. And Aliza and Elana Waksal … Aliza Waksal wanted to sell all her shares in ImClone.
[The stock price was then around $60, amid furious trading. There were rumors that Erbitux had run into problems with the FDA. 40,000 times $60 = $2.4 million, by the way.]
—What happened next?
—Alan Greenberg called. He wanted to sell all of Sam’s shares. I said that because Sam was president of ImClone, he was subject to rule 144 [against insider share-dumping] … so he said fine. Then he said, “Will you look at the fax, I sent you a fax.”
—What did the fax say?
—The fax said to transfer all of Sam’s shares to Aliza’s account, and then sell all those.
—And what did you say?
—I said, “Uh. I don’t think you can do that. It’s still subject to the rule.” He said, “Well, do me a favor, call Peter.”
—What did you do then?
—I called Peter. I said, “Alan Greenberg wanted to sell all Sam’s stocks out of Aliza’s account. He can’t do that, can he?” He said, “No, I don’t think he can. But do me a favor and ask Julia Perez?”—that was our compliance officer. So I went over to Julia Perez’s office and asked, somewhat apologetically, because I thought I knew the answer already, whether Sam Waksal could transfer shares to another account and then sell them from there. And she said no.
—What happened next?
[Elana Waksal called and asked about the stock.]
—I told her the stock was already going down.
—And what did she say?
—She swore. Uh, is it all right to repeat that, Judge?
Judge Miriam Cederbaum [74 years old, stern, but with a soft-spot for young unlawyerly Douglas]: Well, you already said she swore.
[Doug got off the phone with Elana and called Peter Bacanovic.]
—We were talking about the morning’s events, and how crazy it was, and then Peter said: “Oh my God! Get Martha on the phone!”
[Doug dialed through and Bacanovic left a message.]
Faneuil: He said to me, “Listen, Martha’s going to call you, and you have to tell her what’s going on.” I said, “Can I tell her about Sam? Am I allowed to?” He said, “Yes, of course you must, that’s the whole point.” And I said, “OK.”
There it was, the biggest mistake of Bacanovic’s life. He should have left Martha alone—her 4,000 shares in ImClone were negligible, for all it affected her the stock could have vanished from the face of the earth (it didn’t: even after Waksal was sent to prison for that day’s activity, it never went below $10). Still, if he needed so badly to alert Martha, Bacanovic could have directed Doug to tell her that he’d heard “rumors” of a sell-off of ImClone, or that ImClone was rapidly falling, both of which would have been true without comprising insider information.Judge Cederbaum suspended proceedings for the day.
I walked out of the building with a reporter from the National Enquirer. The next day Doug would testify that Martha Stewart had indeed called. He told her Waksal was dumping his shares. She said sell. Two years after the sell-off, a pair of intrepid cameramen photographed everyone coming down the stairs of the federal courthouse, but for the most part the video-cameras were set up across the street, all in a row with little tents to keep off the cold rain. We crossed to the subway entrance and lingered a while behind the camera-village. Finally Martha Stewart emerged, looking from a distance like she does on television, and got into a car. “All right,” said the young lady from the Enquirer, now turning resolutely toward the station. “I just wait to make sure she doesn’t get assassinated, and then I’m gone.”
It was hard for a non-press person to get into the courtroom—that is, if you wanted to keep reasonable hours—and it wasn’t until the fourth day of Doug’s testimony that I spotted Henry Blodget among the media pack. Blodget is the second hero, along with Sam Waksal, in Denby’s memoir: the bullish Merrill Lynch analyst who never said “sell.” He was a prophet of the New Economy—”I feel like a man riding a stallion across an endless plain,” Denby quotes Blodget as saying, Blodget having studied English at Yale, “and someday the horse will begin to slow.” In fact, of course, the horse simply died, but Blodget—well, he kept beating it. And now he was at the trial, watching a version of what might have happened to him, and writing it up, with a criminal’s compulsive fastidiousness, for Slate.
Even in his disgrace you could pick out Blodget immediately: tall, late-thirties, and dressed with more wealth and ease than his new journalist pals (despite a $4 million fine for misleading investors, it will be a long time before Blodget has to do any honest work). By virtue of all the time he spent hyping Internet stocks on CNBC, and more even by virtue of his fall, Blodget is a celebrity, an elder member of a particular subset of that genre. Who else? Monica, unforgettably, blazed the trail; New Republic weasel Stephen Glass was the first man of my generation to have a major motion picture based on his life; the inspired Jayson Blair; and now Doug.
What a bunch of fuck-ups. As The Baffler announced to the Boomers in 1992, in an essay called “Twenty-Nothing”—”We were too cynical too young about your motives, your politics, your TV, your bad rock’n’roll. This is a generation that will never again cooperate, will never make your coffee with equanimity or discuss happily the latest doings of your favorite sitcom characters.” That proved too optimistic by far. We’ve cooperated, all right—with everyone: prosecutors, television crews, handbag makers, publishers. People called us on the phone and we said yes, yes, yes. In the 90s we got inside the machine and really made a hash of it.
And now by all rights this essay should swerve into autobiography. Isn’t that what one does? It’s certainly what Denby does in American Sucker—the premise of the book is that his mad dash for profit during the tail-end of the Boom represented a general cultural malaise. A well-connected man, Denby in the memoir attends investor conferences; lunches with Waksal and Blodget; becomes personally offended by the tomes of dour cultural critics and bearish economists; and even seeks reassurance from people like SEC Chairman Alfred Levitt that the Boom will go on indefinitely, that this time poor Denby, who began reviewing Hollywood movies at the exact historical moment they stopped being any good, is not too late. There is a scene straight out of Dostoevsky in which a random stranger yells “Ericsson!” at Denby on the street. Our hero buys Nokia instead, but the tipster haunts him. Later in the book, Denby sees the man on the downtown 2 train and confronts him. It turns out the man had seen Denby eavesdropping on an investment conversation at the newsstand; also that the man had eschewed Ericsson in favor of Nokia. Denby is annoyed that the stranger gave him a bum tip. Can he trust no one? He misses the stop at Times Square.
Anyway—me. Didn’t I make a hash of the 90s, too? Didn’t I, for example, lose the person I most loved? Something about those years really messed with your head, and what have I got to show for it? My high school classmate is testifying in the most publicized corporate malfeasance trial of the year; embarrassing photos of him are much sought-after by the New York Post; I don’t even own a suit. What is this feeling I’m feeling? The narcissism of diverging paths? It seems particularly to afflict a certain New York type. Norman Podhoretz; James Atlas; the intolerable Michael Wolff (now covering the trial for New York magazine—”if I just rearrange enough sentences so they contain superfluous nonrestrictive clauses, they’ll think I’m Henry James”). On a higher plane, because he’s honest and he can write, it happens to Denby when he meets Sam Waksal during the latter’s prime time: “I wondered if this unconventional researcher—CEO, with his charm, his animation, his many interests, wasn’t the kind of man I would have been if I had my choice and could start all over again.”
This feeling—in German there must be a word for it—has its finest expression in Chekhov, when Uncle Vanya, an unremarkable, self-pitying, in some ways even an unpleasant man, suddenly, in the depth of his despair, cries out: “If I’d had a normal life I could have been a Dostoevsky! I could have been a Schopenhauer!” It’s an incredible moment—it seems to come from nowhere, it accords with nothing that Vanya has until then said. And what I think Chekhov is saying is, No, Ivan Petrovich. You could not have been those writers. But yes. Yes, we all feel that way.
And it’s not envy, really, and part of the reason Podhoretz et al are so loathsome is that they call it envy anyway, for envy is a sin and they purport to be confessing it. They want credit. With Denby it’s more like projection, plus protest. We don’t envy stock brokers or Vanity Fair writers—we just wish we could do what we do but have what they have. Which is impossible.
I could have been a banker, I could have been a dot-com CEO! I could have been a broker’s assistant, and been party to illegal boom-time trading. I could have been more attentive, and less selfish. In America you can always go to law school. I could have done that.
Robert Morvillo, Martha Stewart’s attorney (he also defended Merrill Lynch and Henry Blodget against Attorney General Eliot Spitzer), is a short, big-bellied man with a classic comb-over. He has more cachet in the courthouse than Martha. People see her—enormously tall and imposing, but exhausted—and they grow uncomfortable; when Morvillo walks by, they whisper, “There he goes.”Lawyers are like doctors around their sick clients—professional, impressive, they might win or lose but there will be other days. For Martha this is it. On the day of Morvillo’s cross-examination of Doug the overflow room with the large closed-circuit TV screen was standing-room only, filled with lawyers and law students who’d come to watch.
Bacanovic’s lawyer David Apfel had lost all his friends with his nasty cross-examination, harping indignantly on Doug’s casual drug use and repeatedly drawing incredulous looks from Karen Patton Seymour (Apfel: “You are aware, aren’t you, Sir, that the federal government, or the state government on the federal government’s request, could charge you with a felony for use of the drug Ecstasy?” Faneuil: “Um. I certainly hope they don’t.” Look from Patton Seymour: “Apfel, you’ve got to be kidding me”), whereas Morvillo was genial, worldly, ironic. He just wanted to find out what happened. But it was all so long ago…
Morvillo: Can you recall how many customers you talked to on that day [December 27, 2001]?
—And you can’t recall the conversations of any customers that day, is that correct?
—And you can’t recall even the words of one customer, right?
—But you did talk to Martha Stewart—that you recall, right?
This went on for a while. Might not Doug in fact have forgotten the conversation, and then reconstructed it under various pressures, such as the threat of going to jail? Also a profounder subtext to Morvillo’s questions—”water under the bridge!” it said. “A different time, a different era. September 11! Let’s move on.”
Morvillo: Are there things in that conversation that you can’t recall?
Faneuil: I think I remember most of it.
—And in order, too.
—I’m not sure I understand.
—Not only do you remember all the words, but your recollection is so precise, that you remember the exact order?
Judge Cederbaum [irritated]: The witness can’t be asked what he can’t recall.
As I write, the sides are presenting their closing arguments. Sam Waksal, the off-stage fool of this drama, is in prison, but two weeks ago Erbitux was approved by the FDA (ImClone stock climbed back up to $45). The Enquirer ran a probing story on Martha’s recent stress-related “binging.” And Doug’s testimony, part of a deal with the government to reduce or (more likely) wipeout a potential prison sentence, was met with universal acclaim. Even Blodget, the trial’s corrupt Wildean commentator, who promised that after cross-examination there would be “so little left of Douglas Faneuil’s carcass that even the vultures will give up and fly away”—even Blodget admits this. Eat it, Blodget! But more than that, my Newton South classmate showed the way. How do we deal with the government? (Lie to them.) And if it turns out we’re covering for the crooked rich and the SEC is coming for us? (Spill the beans.) And then? Disappear. Do not confuse your life with history, or the movies—especially in an era of corrupt history and bad movies. And when Karen Patton Seymour asks you questions, just tell her what she wants to know.
Patton Seymour: Are you currently employed?
—I work at an art gallery.
—And how long have you been employed there?
—And where do you now reside?
—I reside in Brooklyn.
Sympathetic murmurs in the courtroom. A vision of Doug on the F-train. We have arrived.