Martha Stewart Trial: Faneuil Fends Off Morvillo

10 February 2004

It should have been a day of high courtroom drama in which fragile 'Baby' Douglas Faneuil -- the prosecution's key witness on whose testimony the case against Martha Stewart and her Merrill Lynch stockbroker Peter Bacanovic stands or falls -- was relentlessly broken by Stewart's colorful lawyer Robert G Morvillo.

But theater-lovers would have demanded their money back. Theatrics were there none. Instead, the duo's much-anticipated encounter more closely resembled a battlefield stalemate in which Faneuil stood his ground against Morvillo's rehash of testimony already heard.

The latter did, however, manage to extract one important concession from Fabeuil: that he had not formally conspired with the media maven and her broker to commit crimes or to conceal them from investigators. Both stand accused of conspiracy and obstruction of justice in connection with Stewart's sale of nearly 4,000 shares in ImClone in December 2001.

"Did you ever speak to Martha Stewart about the agreement you made with Peter Bacanovic to commit a crime?" asked Morvillo.

Faneuil: "No."

Morvillo: "You were never asked by Martha Stewart to commit a crime?"

Faneuil: "Correct."

But Faneuil otherwise stuck to his guns, insisting he had complied with a cover-up of the reasons for Stewart's stock sale because he felt intimidated by his boss, Bacanovic.

He also told the court of another reason for his concern. "I knew the real reason for Ms Stewart's trade. The thing I have always been most scared of is being up here on the stand and having to tell the truth when Peter [Bacanovic] is lying."

The day's sole moment of melodrama came when Stewart's personal assistant Ann E Armstrong took the stand, seemingly nervous and uncomfortable at being the center of attention.

Among other responsibilities, Armstrong told the court, she was responsible for taking phone messages and monitoring Stewart's calendar. She also took handwritten notes about who called and also kept a telephone log on her computer.

The last point is central to the charge of obstruction of justice -- because prosecutors allege Stewart altered it briefly in early 2002, removing part of a message from Bacanovic about ImClone, then restoring it a short time later. The message, Armstrong told the court, read: "Peter Bacanovic thinks ImClone is going to start trading downward."

As the witness described a phone call from Stewart that same morning she began to cry. "We talked about the holidays," she said. "I thanked her for the plum pudding she sent." Judge Miriam Goldman Cedarbaum asked if she wanted to take a break but Armstrong declined, only to break down again moments later. Stewart also looked visibly upset.

The prosecution attorneys then requested a recess and the court adjourned for the day.

Bacanovic and Stewart also face separate charges -- not to be heard at this hearing by Judge Cedarbaum -- of insider trading relating to Stewart's sale of ImClone stock.

Data sourced from: New York Times; additional content by WARC staff