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Defense quickly rests in Martha Stewart trial

By Brooke A. Masters
The Washington Post

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U.S. District Judge Miriam Goldman Cedarbaum sent the jury home without deciding whether she will throw out the most serious charge against Stewart — that she lied to investors about her sale of ImClone Systems shares to prop up the share price of her own company, Martha Stewart Living Omnimedia.

The securities-fraud charge carries more prison time than the other charges Stewart is facing — a maximum of 10 years rather than five. Under federal sentencing guidelines, Stewart almost certainly would have to serve prison time if convicted on that count, while she might be able to persuade a judge to give her home confinement or weekends in jail for the other charges.

Stewart's defense lasted less than an hour, and her attorneys called just one witness — Steven Pearl, a junior lawyer who was present Feb. 4, 2002, when Stewart was interviewed by the FBI and other federal investigators.

Prosecutors have charged Stewart with lying at that meeting when she recounted her version of the facts surrounding her Dec. 27, 2001, ImClone sale and her conversations with Bacanovic and his assistant Douglas Faneuil.

Faneuil has testified that he and Bacanovic left Stewart a message that morning and that, when she called back, he told her — on Bacanovic's instructions — that ImClone founder Samuel Waksal was unloading all his stock in the company. The company announced bad news about its cancer drug the next day, and Waksal is now in prison for securities fraud.

Prosecutors and an FBI agent present at the interview say that Stewart was asked whether there was a written record of Bacanovic's message and that she said she did not know. Her assistant Ann Armstrong testified that Stewart tampered with that exact message from Bacanovic just four days before her interview with federal investigators.

But defense attorneys used Pearl's testimony to cast doubt on the government's version of that interview by having Pearl read a short section of the memo he wrote in the two days after the meeting.

The typed memo said only that Stewart had been asked, "At what time did PB leave message? MS does not know." However, Pearl's value to the defense may have been compromised during cross-examination when he said that he no longer remembers what was said to and by Stewart at the official interview and that the handwritten notes he took during the interview reflect two somewhat different exchanges than his typed memo.

Stewart defense attorney Robert Morvillo rested his case after Pearl's testimony, which appeared to startle at least a couple of jurors.

The defense team would not comment, but outside lawyers said short defense cases are not unusual, particularly when a defendant does not take the stand.
 
Prosecutors in the Stewart case then put on an equally short rebuttal case, recalling their ink expert to disparage testing done by a defense expert and playing a portion of Bacanovic's taped interview with the Securities and Exchange Commission in February 2001.

In it, Bacanovic undermined the credibility of the only witness who supports Stewart's and Bacanovic's contention that she unloaded her stock because they had previously agreed she would sell if the price fell to $60, as it did that day. Stewart's business manager, Heidi DeLuca, testified this week that Bacanovic told her in November 2001 that he planned to get Stewart to agree to sell the stock at that price.

But on the tape, Bacanovic was asked, "Did you talk to Heidi about, you know, 'Martha Stewart told me that once the stock hits 60 I should sell'?" He replied that he had not. "I don't get into that level of detail with Heidi," he said.

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