Faneuil ends testimony at Stewart trial

NEW YORK - Martha Stewart's attorney wrapped up his cross-examination of Douglas Faneuil Monday after trying to chip away at the government's star witness, and not long afterward, Stewart's personal assistant broke down sobbing on the witness stand.

Stewart's attorney, Robert Morvillo, kept his questioning of Faneuil brief -- about half a day -- compared with the cross-examination by the lawyer for Peter Bacanovic, Stewart's former broker at Merrill Lynch and co-defendant at the trial. That cross-examination, by David Apfel, lasted about a day and a half last week and caused the judge at more than one point to urge Bacanovic's lawyer to "move on."

Morvillo finished questioning Faneuil shortly after lunch Monday, and lead prosecutor Karen Patton Seymour then questioned him again briefly, wrapping up the testimony by the government's star witness. Much of the government's case will hinge on whether jurors believe Faneuil or the story presented by the defense.

The prosecution then briefly questioned a former Merrill employee before calling Ann Armstrong, Martha's personal assistant, as the next witness.

Armstrong testified that she was in her office on Dec. 27, 2001 -- the day of Stewart's now well-known sale of ImClone Systems stock -- when Bacanovic called, asking to speak to Stewart. Armstrong told him Stewart was on a plane to Mexico, and when he asked if he could speak to Stewart on the plane, Amstrong testified that she told him it was just too complicated.

Bacanovic left a message saying he needed to speak with Stewart about ImClone, according to Armstrong, who said she logged the entire message in a computer message log and also wrote down part of the message, which said: "He thought ImClone was going to start trading downward."

Prosecutor Michael Schachter then asked if Stewart called on the same day and Armstrong said, Yes. Since it was the first time she'd spoken to her boss since Christmas, Amstrong said, she thanked her for the gift of plum pudding.

She then broke down crying on the stand. She tried to compose herself to describe what happened and said, "I gave her the messages. There weren't many that day," adding that she told Stewart that some people needed to talk to her. Then she broke down again. After a five-minute halt, the judge recessed the trial until Tuesday, when Armstrong's testimony is expected to continue.

Earlier, Stewart's lawyer Morvillo noted discrepancies in Faneuil's testimony about a call he received at some point after Stewart's now well known sale of ImClone stock in late 2001.

In last week's courtroom testimony, Faneuil said Stewart knew him from having talked to him before. But Monday Morvillo pointed to a transcript of Faneuil's interview with prosecutors in 2002 in which he said that he had to identify himself to Stewart during the call.

He also trapped Faneuil a bit when he asked if the former brokerage assistant at Merrill Lynch had been well prepared for the trial by the prosecution. Faneuil said he had been surprised by some of the prosecution's questions, but then couldn't specify questions that were different from the prep sessions.

Faneuil also told of his fears in testifying against the home decor expert and her former broker, Peter Bacanovic, who was Faneuil's boss at Merrill.

Faneuil's concerns stemmed mainly from Bacanovic, who is on trial with Stewart for allegedly lying to investigators about the reasons for her sale. Stewart is facing securities fraud as well as obstruction of justice charges.

"The thing I have always been the most scared of was being up here on the stand and having to tell the truth in a trial in which I knew Peter was lying," Faneuil testified in response to a question from Morvillo.

Faneuil also said he feared knowing that he'd done something wrong and knowing all the details of Stewart's transaction.

Earlier, Morvillo repeatedly asked Faneuil if there were things about the day of the ImClone sale that the he didn't remember, asking at one point if he thought he remembered his dealings with Stewart word for word.

"I don't remember every word exactly, but for the most part I believe I remember it word for word," Faneuil replied.

Lead prosecutor Patton Seymour objected to the repeated line of questioning, but U.S. Judge Miriam Goldman Cedarbaum allowed the defense to proceed.

Meanwhile, there was a report Monday that Stewart's defense is planning to put Faneuil's former attorney, Jeremiah Gutman, on the stand to counter his testimony.

The Wall Street Journal said Jeremiah Gutman, an 80-year-old civil rights lawyer who has represented Hare Krishnas and the Rev. Sun Myung Moon, could be asked questions aimed at discrediting Faneuil in the obstruction of justice trial.

But the newspaper added that calling Gutman would be a gamble by Stewart's team, since he could possibly give Faneuil more credibility. Gutman has declined to meet with the defense lawyers, the report said.

The defense has been trying to undermine the credibility of Faneuil, who testified last week that he tipped off Stewart in December 2001 that Sam Waksal, then CEO of ImClone Systems, was trying to dump his stock.

Faneuil said Thursday that he took part in a cover-up of Stewart's controversial sale of ImClone stock because he was afraid he would lose his job. The trial took a scheduled day off Friday.

On Thursday, defense attorney David Apfel asked if Bacanovic had told Faneuil his pay would be docked if he didn't lie to investigators. Faneuil responded, "I felt I would be fired if I didn't lie." Apfel objected, and Faneuil conceded he was not explicitly told he would lose his job if he didn't lie.

Stewart and Bacanovic -- who say they had a long-standing pact to sell ImClone stock if shares fell below $60 -- are charged with conspiring to cover up the real reason behind the sale.

Faneuil pleaded guilty to a misdemeanor for his part in the scheme and agreed to testify about Stewart's sale of 3,928 shares of ImClone on Dec. 27, 2001.

Stewart, the lifestyle expert who founded Martha Stewart Living Omnimedia (MSO: Research, Estimates), faces up to 30 years in prison while Bacanovic could be sentenced to 25 years if convicted on all counts, according to the U.S. Attorney's office.

Waksal is serving a seven-year prison term after pleading guilty to charges of trying to sell ImClone (IMCL: Research, Estimates) stock a day before the government said it refused to review the company's application for a new cancer drug, Erbitux -- news that started ImClone shares tumbling.