US News

FRYING PAN TO FIRE – NOW THE IRS IS OUT TO GRILL MARTHA

If Martha Stewart survives her tangle with the feds, tax investigators are ready to pounce – probing the bills from a Latin American vacation that the ex-billionaire claimed as business expenses, law-enforcement sources told The Post.

Criminal investigators at the Internal Revenue Service have taken note of testimony delivered at Stewart’s obstruction-of-justice trial this week in which her personal financial assistant admitted billing her media company for tens of thousands of dollars in vacation expenses.

Sources said yesterday IRS investigators will push to launch a tax-evasion probe if her trial results in a hung jury or if Stewart is acquitted of the five federal charges relating to her ImClone stock sale.

They want to investigate to determine whether Stewart caused her company to file a false tax return by wrongly claiming personal bills as business expenses.

“You could easily see something happening here,” one source said. “Let’s just say, certain people’s ears have been pricked.”

Before any tax investigation is approved, the IRS officers would have to win approval from the Justice Department’s tax division and the Manhattan U.S. attorney’s office.

Prosecutor Michael Schachter has already twice raised the issue of the Diva of Domesticity billing personal expenses to her company.

Stewart’s financial assistant Heidi DeLuca admitted on Tuesday she followed Stewart’s instruction to bill the company for a swanky 11-day vacation to Mexico and Panama over the 2002 New Year period.

“Based on the information that I was given, [the trip was classified] as a business expense,” DeLuca told Schachter.

Stewart’s then-best pal, Mariana Pasternak, shared a $1,500-a-night suite with the good-living guru for seven nights at the luxurious beachfront Las Ventanas al Paraiso on the Baja peninsula starting Dec. 27, 2001 – the day Stewart sold $228,000 worth of ImClone shares.

Stewart’s bill at Las Ventanas was almost $17,000 and included $1,500 worth of spa treatments, a $1,060 sea grill dinner on New Year’s Eve and $300 hiking and kayak tours.

After Mexico, Stewart and Pasternak flew to Panama where they joined ImClone founder Sam Waksal for a 50th birthday bash for Italian millionaire Jean Pigozzi.

Schachter has also grilled Martha Stewart Living Omnimedia chief financial officer Jim Follo on her expenses.

Follo said Stewart had occasionally submitted expenses that “I don’t feel either supports the corporate policy or the tax policy.”

He said he raised questions with Stewart over portions of a $17,000 bill for a weekend driver, a $13,000 trip, and various hair treatments.

A source in Stewart’s camp has defended the expenses, saying Stewart often combined business and pleasure, using ideas she got on trips in her media projects.