Stewart jury asked to decide: Who lied?

Celebrity's trial moves into closing arguments

March 02, 2004|By Jean Marbella | Jean Marbella,SUN NATIONAL STAFF

NEW YORK - Someone lied, attorneys on both sides of the Martha Stewart stock trial agreed yesterday. But who?

The celebrated diva of all things domestic, desperate to protect a fortune built around her image of perfection? Her stockbroker, eager to tip off his famous client and reverse losses elsewhere in her portfolio? Or the stockbroker's assistant, an All About Eve underling who saw an opening for personal advancement and took it?

The month-long trial of Stewart, charged with lying to federal investigators about the timing of her sale of stock in ImClone Systems, headed into its final lap yesterday as attorneys began their closing arguments in the case before it goes to the jury for deliberation and its verdict.

Today, Stewart's attorney, Robert Morvillo, will give his summation, and, after instructions from U.S. District Judge Miriam Goldman Cedarbaum, the jury could begin deliberations as soon as tomorrow.

Assistant U.S. Attorney Michael Schachter outlined what he called a series of lies that Stewart and co-defendant Peter Bacanovic, her Merrill Lynch stockbroker, told about her sale of stock in ImClone Systems, a biotech company, on Dec. 27, 2001.

"Martha Stewart thought she would not get caught," Schachter said. "Martha Stewart and Peter Bacanovic were wrong."

That morning, Sam Waksal, the owner of the company and a close friend of Stewart, tried to dump his own stock, a day before the Food and Drug Administration was to announce that it was rejecting ImClone's application for approval of its experimental anti-cancer drug.

The announcement was expected to send ImClone's stock price plummeting, and Waksal is now serving a prison term for insider trading.

Schachter said Bacanovic, who was also Waksal's stockbroker, tipped off Stewart that the ImClone chief was dumping his shares, and she followed suit that afternoon. The defendants have maintained that they had a pre-existing agreement to sell the stock if its price dropped below $60, and that is why Stewart sold her shares that day.

After the fact

But Schachter suggested that Stewart and Bacanovic invented this agreement after the fact and that she actually sold because she was told of Waksal's dumping. In fact, Schachter said, when Merrill Lynch launched an internal investigation about the flurry of ImClone trading on Dec. 27, Bacanovic didn't explain Stewart's sale by bringing up the alleged pre-existing agreement.

"He said nothing about any $60 pricing agreement," Schachter said. "He didn't say anything about what is now the cornerstone of his defense."

Stewart similarly lied to the FBI and the Securities and Exchange Commission when those agencies began their investigation into ImClone trading, he said. In an interview with federal agents Feb. 4, she said her assistant simply told her that Bacanovic had called Dec. 27 and asked her to call him back. And in a later interview, April 10, Stewart said she didn't recall whether she was told that Waksal was dumping his stock.

But Schachter reminded the jury that several days before the Feb. 4 interview, Stewart asked to see her assistant's phone log and saw that the message from Bacanovic was more specific: He thought ImClone was going to start trading downward.

The assistant, Ann Armstrong, testified that Stewart initially changed the log entry, deleting the information about the stock starting to trade downward. Almost immediately, though, Stewart instructed her to restore the entry as it was originally, Armstrong testified.

"Nothing changes the fact that she altered it in the first place," Schachter said. "Why does she alter it? She sees the message for what it is. She knows why Peter Bacanovic thinks ImClone is going to start trading downward. She sees evidence that she was told the Waksals were selling. It's a peek inside Martha Stewart's head. ... It tells us her state of mind."

Key witness

Much of the government's case revolves around the testimony of Bacanovic's assistant, Doug Faneuil, who actually fielded and made many of the telephone calls Dec. 27. Phone logs showed that Faneuil juggled multiple calls - as well as e-mails and faxes - that day: from Waksal and his family, trying to sell their shares; from Bacanovic, trying to keep apprised of the situation while on vacation in Florida; from Stewart, en route to her own vacation in Mexico.

Schachter argued that Stewart well knew that the Waksals were trying to get rid of their stock: Faneuil testified that after the Waksal family began dumping their stock, he called Bacanovic, who ordered him to relay this information to Stewart.

Additionally, her friend, Mariana Pasternak, who was traveling with her to Mexico, testified that Stewart told her the Waksals were trying to sell their shares. And Stewart left a message for Waksal that day, asking him what was going on with his company's stock.

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