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Former Faneuil Lawyer Backs Testimony

Posted on: Monday, 23 February 2004, 06:00 CST

A former lawyer for Douglas Faneuil took the stand Monday at the trial of Martha Stewart and her former stockbroker and bolstered key elements of the testimony from the government's star witness.

Jeremiah Gutman, who was retained by Faneuil in early 2002, was called as a witness by lawyers for stockbroker Peter Bacanovic. But he appeared to boost some of the main assertions Faneuil gave for the prosecution.

Faneuil has testified that he passed a tip from Bacanovic to Stewart on Dec. 27, 2001, that ImClone CEO Sam Waksal was unloading his shares of ImClone Systems stock. Stewart promptly sold hers.

The story given by Faneuil, a former assistant at Merrill Lynch & Co., is central to the government's case that Stewart and Bacanovic lied when they claimed they had a pre-existing deal to sell ImClone at $60.

Faneuil first supported Bacanovic and Stewart, then changed his story in June 2002 in a cooperation deal with the government.

Earlier in the trial, Faneuil testified that Gutman had told him he knew about a deal between Merrill Lynch and the government to ignore any wrongdoing by Stewart and hand over Waksal "on a silver platter."

The defense has tried to discredit that story. But Gutman testified Monday that, while he did not use those exact words, he told Faneuil "something like that."

Gutman said a Merrill official "had told me that he was working on making a deal and that deal would involve getting all Merrill Lynch people off the hook, and let the chips fall where they may."

He described Faneuil at the time as distraught to the point of tears. Merrill Lynch officials have denied the existence of any deal.

Calling Gutman, an 80-year-old civil rights lawyer, was something of a risk for Bacanovic's lawyers. He repeatedly declined to meet with them before the trial.

The lawyer has emerged as a key figure in the trial.

An FBI report of a 2003 interview with Gutman raised the possibility that Faneuil had initially told his lawyer that Waksal himself, not Bacanovic, had ordered him to tip Stewart about the ImClone selling.

Prosecutors said at the time that Gutman's memory was faulty.

Also Monday, the judge declined to rule immediately on whether she should throw out any charges in the case. Lawyers for both Bacanovic and Stewart gave the judge papers over the weekend urging her to dismiss parts of the indictment.

Cedarbaum has appeared intrigued by the possibility of throwing out the top count against Stewart, securities fraud, which accuses her of deceiving investors in her media conglomerate, Martha Stewart Living Omnimedia.

The judge has called that charge "novel" and "the most problematic" of the five counts each against Stewart and Bacanovic.

The count refers to three statements Stewart and her lawyers made in June 2002 in which they insisted she sold ImClone because of the $60 agreement.

Prosecutors say that was a deliberate play to keep the stock price of Martha Stewart Living Omnimedia high. Stewart owned nearly all the voting shares in the company and stood to lose $30 million for every dollar the stock fell.

Also Monday, a defense ink expert testified Bacanovic used at least three different pens on a worksheet of Stewart's portfolio on which the notation "(at)60" appears next to a listing for her ImClone stock.

The government contends Bacanovic added the notation to make the $60 agreement seem legitimate.

But the expert, Albert Lyter III, said the "(at)60" appears to have been made with the same pen as a small dash that appears next to a listing for Apple Computer stock.

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