Stewart is, by a wide margin, Bacanovic's most significant client. The two have a relationship that dates back sixteen years. A Manhattanite born and bred, reared on nights at the theater and dinners at Sardi's, Bacanovic became friends with Stewart's daughter, Alexis, while he was at Columbia and she was at Barnard. Through Bacanovic's time at ImClone in the early nineties, during which he came to know Sam and Aliza, they kept in touch. When Bacanovic joined Merrill Lynch in 1993, Stewart gave him a small slice of her portfolio to look after. With his perfectly stubbled chin, flashing smile, and impeccable manners, he also made for the ideal, entanglement-free escort for Stewart, who has remained single since her divorce from Andy Stewart in 1990.
By the mid-nineties, Bacanovic himself was very much a fixture on the New York social circuit. At an American Ballet Theatre opening or an event at the New York Botanical Garden, he could be seen with a Marina Rust, a Susan Fales-Hill, or a Sloan Lindemann Barnett on his arm. How they loved him: While their husbands ducked out of such evening drudgery, he was available every night, with a camera-ready grin and the ability to chatter the night away on every topic from the ballet to his favorite Andy Warhol painting to seating plans for an intimate dinner at Da Silvano. "He is like a bumblebee," says one woman friend. "He tells Susan Fales-Hill what Sloan is wearing and vice versa. But he is so happy and charming. When you see him at a party, you really want to talk to him."
Much ink has been spilled about Peter Bacanovic the social climber. It is true that he attached himself to the likes of society arbiters such as Nan Kempner at an early age. "But he wasn't a climber," says his old friend Brad Gooch. "He was incredibly enthusiastic about the society scene, the way other people love movies or Picasso, or other boys follow sports. He mythologized Upper East Side society, which is odd, because generally people who do that are outsiders, and Peter was an insider. He lived there and went to school at the Lycée Français. I was writing for Vanity Fair when I first became friendly with him -- he had a line-by-line knowledge of the magazine. Peter, in his early twenties, knew everything about the social network."
Fales-Hill, a friend of Bacanovic's since the sixth grade at the Lycée Français, is more vehement in his defense: "If anyone is social climbing, it's people climbing to be with him. He has known Sloan Lindemann since she was 2. He has always been part of this world. People just seek him out. I was talking to Muffie Potter Aston at the American Ballet Theatre. He has raised well over seven figures for them, and she is breathing fire. I'm worked up, too. It's insane."
Perhaps most important, Bacanovic just does not like to spend any time alone -- it's a quality, some of his friends say, that's linked to a propensity for depression. So after putting in a full day at the office, instead of returning home to his Upper East Side townhouse -- where Breakfast at Tiffany's was shot -- he will opt instead for a night out at some charity event with a group of friends. In the interest of keeping his head as clear as possible, he won't drink, nor will he hit people up for business. Indeed, many of his society friends have only the vaguest notion that he is one of Merrill Lynch's more successful private bankers, managing a couple hundred million dollars in client accounts. Nor will the society columns refer to him as Peter Bacanovic of Merrill Lynch -- just Peter Bacanovic.
To be sure, he is not the typical blindered, hard-charging Merrill Lynch broker. His effete air and refined tastes as well as his soft-sell approach suggest a more classically old-world approach to money, one at odds with the push-the-envelope mentality that drives the model Merrill Lynch financial consultant. Rarely would he talk about stocks at a dinner party, but if a friend had a need, then Peter would be only too happy to offer a few whispered words of advice. It's a successful strategy; the less Bacanovic pushed his business, the more in demand he seemed to become. Clients come mainly through referrals, and he is forced to turn a number of them away. The clients vary: many of the trust-fund variety but many, too, who are less grand, including a mix of writer and artist friends. But none were as prominent as Stewart.
Through much of last fall and early winter, friends say, Bacanovic and Stewart had been having a spirited debate about the prospects of ImClone, hooking up by phone about twice a week.
Stewart had bought 5,000 shares of ImClone a number of years back on the recommendation of her good friend Waksal. Her cost price was probably in the single digits or teens. In October 2001, she attempted to sell her stake when the drug giant Bristol-Myers Squibb, making a $1 billion investment in the company, offered $70 a share to all public shareholders. The offer was oversubscribed and she could sell only 1,072 shares. After peaking at $75 on December 6, the stock began its descent as worry built in the market over FDA approval and the millions of dollars of insider selling by the Waksal brothers.
Friends of Bacanovic say that he'd urged Stewart to sell, citing the stock's volatility and the insider selling. But Stewart, herself a former stockbroker (and having her own relationship with Sam Waksal), was reluctant to unload into a down market for the stock. It is now well known that ImClone and Bristol-Myers insiders were aware as early as December 4 that the FDA was having its doubts over Erbitux. But as insiders sold, Stewart held on -- perhaps out of loyalty to her old friend Waksal, perhaps out of pure stubbornness. While Bacanovic knew Waksal from his time working at ImClone and was Aliza's broker, his friends say that they are not as close socially as they used to be; he hasn't, for instance, appeared at Waksal's star-studded Christmas parties for years now, and while Waksal may still be a client, he has not been a particularly active one of late.
On Friday, June 14, when Bacanovic emerged in the public eye as Stewart's broker, he was on an airplane flying to London to visit a friend for the weekend.
As the story exploded in the tabloids, he remained in London.
Under pressure to explain the trade, Stewart told the media and investigators that she and Bacanovic had agreed to sell the stock if it went below $60. Bacanovic's account of the stock sale -- one that he had given the SEC in January and that he repeated to his superiors at Merrill while in London -- was the same: There had been a client agreement between himself and Stewart that when the stock hit $60, she would sell. Many took this to mean that Stewart had placed what's called a stop-loss order, meaning that there would be a paper trail; but people close to Bacanovic insist that this was a verbal agreement, and stress that neither one has wavered from this account.
While Stewart and Bacanovic may have offered different time periods for when the agreement was struck -- she says November; he says December -- friends point out that this was in the context of numerous discussions of when to get out of the stock. This seemed to be essentially where the insider-trader case would be made or lost. But then the case took a dramatic turn.