The Broker Who Fell to Earth (Published 2006) (2024)

Correction Appended

She doesn’t remember.

Peter E. Bacanovic, his gall rising, could not believe it. But there it was in print. “I honestly don’t remember exactly what I was prosecuted for,” Martha Stewart is quoted as saying in the September issue of Harper’s Bazaar.

“It’s a very striking comment to make, I mean she is on probation,” Mr. Bacanovic said of his former friend, client and fellow convict, as he sat down for lunch last month at Sette Mezzo, just around the corner from his Manhattan town house.

Five years ago, this Upper East Side restaurant, which caters to a select mix of society tastemakers, financial kingpins and television celebrities, was the epicenter of Mr. Bacanovic’s world as a Merrill Lynch broker to the elite. On this day, however, a less effervescent Mr. Bacanovic shows up, one who seems more interested in venting about Ms. Stewart’s memory than finding a friend’s cheek to kiss.

His eyes are red and a resurgent bout of allergies gives him persistent sniffles. He also suffers from bronchitis bad enough that he frequently has to pause for breath when taking a flight of stairs.

“I am chronically sick and chronically unemployed and without any specific plan about how to proceed next.” He pauses, taking special care to keep a promise he made to himself that he would no longer refer to Ms. Stewart by name. “I will reserve comment on my co-defendant but it’s very glaring to me to take such a cavalier outlook.”

Susan Magrino, a spokeswoman for Ms. Stewart, said Ms. Stewart declined to comment.

Ms. Stewart’s new lease on life illustrates how her fate and that of Mr. Bacanovic have diverged since their release from prison. She is once again a television celebrity and retains her tight grip on the company that she founded. America loves a comeback story, and, if anything, her brush with the law may have given her a needed dose of vulnerability.

Life for Mr. Bacanovic, who is 44 and recently completed his probation, has been a slow trudge through the slough of a legal and regulatory despond. Fired from his job at Merrill Lynch and banned from the securities industry, he is now struggling to find a permanent job and restore his tattered health and psyche.

“I was indicted not because I was the biggest criminal on the block or the biggest insider trader in history,” he said. “I was indicted simply to bring a case against my celebrity co-defendant. I was a device.”

Mr. Bacanovic’s feelings for his former client are complicated: there is resentment fueled by what he sees as the unfairness of his lot relative to hers, yet one that is tempered by warm memories of their shared love for chow chows and of Christmases spent together in the kitchen of Ms. Stewart’s home in Westport, Conn. Still, it was more than a fancy for heavily furred dogs with blue-black tongues that bound the two of them together.

The children of fathers with East European origins, Mr. Bacanovic and Ms. Stewart, 65, combined fierce professional ambition with a keen appreciation for the rewards that high society can confer.

To some extent this bond may explain why Mr. Bacanovic remained loyal to Ms. Stewart through the ordeal, even though a guilty plea would surely have kept him out of prison. Loyalty to his friends has been a touchstone for Mr. Bacanovic; he says that he also did not want to become another Diana D. Brooks, the former chief executive of Sotheby’s who turned against her former boss, A. Alfred Taubman, during the price-fixing scandal at the auction house.

“I’m not interested in lying to serve an overzealous 32-year-old prosecutor,” Mr. Bacanovic said. “I stood by my friend and client and told the truth.

“I am also aware that if the reverse were possible, the same would not have been done for me. This was business and my co-defendant is first and foremost a businesswoman.”

That Mr. Bacanovic should be frustrated with a legal system that landed him in prison and upended his life is no surprise. He notes that the trade at the center of his legal woes — Ms. Stewart’s sale of shares of ImClone Systems — was one in which he made no money. Two other friends of Samuel D. Waksal, the former chief executive of ImClone, made more than $5 million selling the same ImClone stock. Insider-trading charges were dropped against them last year, and they paid a combined $2.7 million to settle with regulators.

His rage at the gossip pages is also understandable. Yet the degree to which he has turned against Ms. Stewart, whose connections propelled his career at Merrill, is surprising.

His grievances are many. They range from not being among those who received a Christmas card from her while she was in prison, to her legal strategy. He claims that she turned down offers from the government to settle charges, which would have resulted in no trial and perhaps no prison term. He also blames her for the $75,000 fine he recently paid to the Securities and Exchange Commission to settle insider trading charges.

In his view, Ms. Stewart could have reached her own settlement with the commission at any point between late 2004 and this spring, obviating the need for him to pay a fine. This April, as Ms. Stewart continued to delay, Mr. Bacanovic took matters into his hands and called Ms. Stewart’s daughter, Alexis, a longtime friend of his who had introduced him to Ms. Stewart.

The family friendship no longer existed, but Mr. Bacanovic would ask one last favor — if Ms. Stewart was going to trial, would she help pay his legal fees, as Merrill Lynch had stopped doing so.

“I said, “This is harming me,’ ” Mr. Bacanovic, who had to borrow money to pay his fine, recalled saying. “And she said, ‘No one here feels we owe you anything.’ ”

Ms. Stewart’s daughter, through Ms. Magrino, declined to comment.

It was a response that cut Mr. Bacanovic to the bone. “I was shocked,” he said. Ms. Stewart was holding him responsible for the nightmare they had lived together so painfully.

But he conceded it was a fair inference to make. If Mr. Bacanovic had not called Ms. Stewart in December 2001 about ImClone Systems, there would have been no investigation or trial.

More than anything, he says he blames Ms. Stewart for the loss of his identity. In the public’s mind, he may be known forever as Martha Stewart’s broker.

During his time in prison in Las Vegas, fellow inmates called him Broker and never bothered to learn his name. “I am so tired of hearing her name attached to mine that the less I hear of it, the better my day is,” he said.

The years have taken a toll. His doctor has told him that his immune system has been decimated from years of stress. Sometimes, when he gets out of bed in the morning, he says he feels as if there is a mountain of bricks pressing down upon him.

On the surface, Mr. Bacanovic presents a calm, if unsmiling, face. Before sitting down to lunch, he shows off the Old World manners taught to him by his parents, both of whom emigrated here from Europe, and honed during his years spent in and around Manhattan’s finest salons.

He bows slightly when meeting a woman and engages in polite, precise banter with the lunch crowd. His dress, like his manners, is impeccable. His shirts are crisp with starch and not an unruly hair pokes out from his well-coifed head.

But once he sits down, his eyes blink often as they scan the room around him. It is the look of someone who still feels hunted.

“I was personally attacked in the press,” he said. “I was pursued in every possible way.” His eyes are red and wet, and this time it is not the allergies. “A great many lives were harmed. This goes far beyond the legal system. What was there in these allegations to warrant this? Is the guy a murderer, a child molester?”

Certainly not. But at some point during the early months of 2002, Mr. Bacanovic’s single-minded dedication to Ms. Stewart’s interests caused him to cross a more oblique line even though, after six weeks of testimony during his trial, it is still not entirely clear who said what to whom.

“The only people who know for sure what happened didn’t testify,” said Henry M. Blodget, the former Merrill Lynch analyst who wrote about the trial for Slate. “The real lesson here is that perception is reality. I can’t blame the jury.”

But Mr. Bacanovic, who was convicted on two charges of not telling the truth to investigators, still seems troubled by the verdict. “This whole case was about lying,” he said, referring to a government witness who was accused of perjury and a juror who lied about his past. (Ms. Stewart’s and Mr. Bacanovic’s request for a new trial on this basis was denied by an appeals court.)

Having reached a settlement with the S.E.C. over his insider trading charges, Mr. Bacanovic has allowed himself to look toward resuming some measure of a normal life. He refuses to give any details, but says he has been looking into careers in film, advertising and real estate. He now spends much of his time in Los Angeles, where he lives alone in a house that he rents. But the past still haunts him.

“I’ve spent a great deal of time thinking about my obituary in the last four years,” he said. “I would really rather my tombstone not read ‘broker, Martha’ with dates. I’d rather it read ‘Bacanovic, Peter.’ ”