The star prosecution witness in the trial of Martha Stewart testified yesterday that he had illegally passed on information by telephone to the home-making diva about activity involving the stock of ImClone and that she responded by asking him to sell all of the shares she held in the company.
Douglas Faneuil, formerly an assistant to Ms Stewart's broker at Merrill Lynch, Peter Bacanovic, told a packed courtroom that Ms Stewart had called him on 27 December, 2001 to ask about the ImClone stock. He told her that the family of the founder of the company, Sam Waksal, was dumping its shares.
In testimony yesterday and late on Tuesday, Mr Faneuil provided what prosecutors hope will seal their case against Ms Stewart. Speaking in measured and articulate tones, Mr Faneuil corroborated the government's assertion that Ms Stewart sold the 3,928 shares she had in ImClone, because of the tip-off.
Mr Faneuil, who was set to come under harsh cross-examination later, also refuted claims by the defendants that Ms Stewart had a "stop-loss" order with Mr Bacanovic that would have automatically triggered the sale of her shares once they fell below a value limit of $60 a share.
The testimony from Mr Faneuil built on his description on Tuesday of Mr Bacanovic demanding that Ms Stewart be told what the Waksal family was doing. Mr Faneuil said that on hearing that the Waksals were bailing out of the stock, he blurted: "Oh my God, get Martha on the phone".
Recalling the events that followed, Mr Faneuil yesterday said Ms Stewart called him that afternoon. Mr Bacanovic was in Florida at the time. "I told her that Sam was trying to sell," he said from the witness stand. He recounted saying to her that "she might want to act on the information that Sam's selling all of his shares". He said that after he told her what had happened, she responded: "I want to sell."
The trial, which continues to draw intense media attention in the US because of the celebrity of Ms Stewart, pivots on the events of those few days after Christmas 2001. Waksal, who was convicted and sentenced to seven years in prison last year, sold his shares one day before the government issued bad news regarding a new ImClone anti-cancer drug - a development he knew would send the shares sliding.
Ms Stewart, who was dressed all in black and chewed nervously through much of the testimony, faces five federal charges, including obstruction of justice and securities fraud. Prosecutors allege in particular that she tried to cover up what had occurred to avoid any damage to the share price of her own company, Martha Stewart Living Omnimedia. Her co-defendant, Mr Bacanovic, faces up to 25 years.
The jury appeared riveted by Mr Faneuil, 28, especially when he mimicked what he said were breathless attempts by Mr Bacanovic to persuade him that Ms Stewart's transaction was legitimate. First his boss tried to say the sale of her shares had to do with minimising tax liabilities, before changing the story to say that she had had the stop-loss arrangement.
Mr Faneuil said any attempt he made to respond that the stories were not true had proved hopeless. "I couldn't get a word in edgeways," he said of one conversation with Mr Bacanovic.
Defence lawyers are expected to attempt to discredit the witness, who at first backed up his boss's version of events when questioned by federal investigators. He changed his account in a plea deal in 2002.
Judge Miriam Cedarbaum yesterday allowed defence lawyers to begin probing Mr Faneuil about his history of drug use, before the jury came into the courtroom. He admitted smoking marijuana occasionally and experimenting with the club drug ecstasy.Reuse content