no sheep, but goats!
February 6, 2004
Stewart Witness Sticks to Story on Intimidation
By CONSTANCE L. HAYS
nduring a second day of hostile cross-examination yesterday, Douglas Faneuil stuck to his story, reiterating that he participated in a cover-up of the reasons for Martha Stewart's 2001 ImClone Systems stock trade because he felt intimidated by his former boss at Merrill Lynch, Peter E. Bacanovic.
Mr. Faneuil, whose testimony has lent strong support to the government's case against both Ms. Stewart and Mr. Bacanovic all week, told the court on Tuesday that he tipped Ms. Stewart to sell her shares after being told to do so by Mr. Bacanovic. Both men knew by then that Samuel D. Waksal and some of his relatives, who were also Mr. Bacanovic's clients, were selling or trying to sell thousands of their own ImClone shares, one day before a critical announcement by the company sent the share price into a dive.
Defense lawyers are trying to persuade the jury that Mr. Faneuil's testimony cannot be trusted because of his admitted lies to investigators, his acknowledged occasional drug use and the cooperation agreement he signed, which made him a major government witness.
But in yesterday's appearance, Mr. Faneuil continued to come across as composed and thoughtful in his answers to questions about his conduct, even when those questions were repeated again and again.
He also generated hearty laughter from jurors after recounting various exchanges he had with Ms. Stewart over the telephone. Mr. Bacanovic's lawyers have argued that Mr. Faneuil was "fixated" on Ms. Stewart, but he described a very different relationship. David Apfel, one of Mr. Bacanovic's lawyers, asked him about a meeting with prosecutors in June 2002 in which he had described being scolded by Ms. Stewart about the recorded music that played while she waited on the telephone.
"She told you she was going to leave Mr. Bacanovic and leave Merrill Lynch unless the hold music was changed," Mr. Apfel told Mr. Faneuil, who nodded.
Mr. Faneuil then responded, "That was the one conversation with Ms. Stewart that I chose not to tell Peter about."
He was also asked to read aloud from an e-mail message dated Oct. 23, 2001, he wrote to a friend. "I just spoke to Martha," he wrote. "I have never been treated more rudely by a stranger on the telephone. She actually hung up on me."
The message then gave his account of the conversation with Ms. Stewart.
"She said do you know who the hell is answering your phones? You call, and you know what he sounds like? He says this . . . and then she made the most ridiculous sound I've heard coming from an adult in quite some time, kind of like a lion roaring underwater. I laughed. I thought she was joking. And she yelled, 'This is not a joke! Merrill Lynch is laying off ten thousand employees because of people like that idiot!' And then she hung up."
Ms. Stewart, who had several supporters seated behind her in federal court in Manhattan, including executives of her company, Martha Stewart Living Omnimedia, seemed distressed as the testimony ended. Her daughter, Alexis, brushed a strand of hair from her mother's face as a weary-looking Ms. Stewart stood to leave.
Mr. Bacanovic sat motionless through much of the testimony, staring at Mr. Faneuil as he described life in the triangle between his boss, Ms. Stewart and Merrill Lynch.
Mr. Apfel spent six hours drilling Mr. Faneuil over his account of the suspected tip and the cover-up, asking him a series of questions filled with references to the lies Mr. Faneuil has admitted telling investigators from Merrill Lynch, the Securities and Exchange Commission and the United States attorney's office.
He was clearly hoping to punch holes in Mr. Faneuil's description of the events surrounding the Dec. 27, 2001 trade, and drew Mr. Faneuil's admission that Mr. Bacanovic had "not explicitly" asked him to lie to investigators.
Mr. Faneuil added, however, that he felt pressured to participate in the cover-up, but stopped because of a "schizophrenic office environment" that ultimately "made working for Peter very difficult." He was asked again and again about his six months at Merrill Lynch, his aspirations when he applied for the job, his conversations with prosecutors over the course of the investigation and his reasons for deciding to come forward with what he says is the truth about Ms. Stewart's stock trade.
Much of the cross-examination yesterday dwelled on the minutiae of the compensation Mr. Faneuil received while at Merrill Lynch. He testified that Mr. Bacanovic promised him a $5,600 payment in July 2002, to make up for a delay in a raise he had been expecting. He also said he received the payment even after being suspended from Merrill in June of that year.
While he told the court on Tuesday that Mr. Bacanovic was "the best boss I ever had," he said yesterday that he was not allowed to discuss the subject of Ms. Stewart's stock trade with him, and felt he had to support Mr. Bacanovic's story about why the trade took place.
"I understood what Peter was telling me," he testified, in response to a question from Mr. Apfel about whether Mr. Bacanovic had told him what to say to investigators. Meanwhile, he confirmed that he continued to work closely with Mr. Bacanovic and sent him humorous e-mail messages. "The intimidation about the events of Dec. 27 was very compartmentalized," he told the court.
Several times during the cross-examination, Judge Miriam Goldman Cedarbaum scolded Mr. Apfel for refusing to move on from a particular question, and for now and then answering questions himself.
"Please don't testify," she told him icily, late in the afternoon.
Throughout the daylong inquisition, Mr. Faneuil remained steady, occasionally correcting Mr. Apfel on the wording of his questions. In relentlessly pursuing Mr. Faneuil, Mr. Apfel seemed to alienate others in the courtroom, including many spectators, who groaned when he announced just before the lunch break that he needed four more hours to complete his cross-examination. At one point, he sought to introduce an e-mail message that he said Mr. Faneuil had sent to Mr. Bacanovic that contained an attachment that was "an article about a man having sex with a goat." Judge Cedarbaum ordered the jurors to ignore that. When Mr. Apfel began discussing the message again moments later, she cut him off. "When I sustain an objection," she told him sternly, "you move on to something else."
Robert G. Morvillo, Ms. Stewart's lawyer, will have an opportunity to cross-examine Mr. Faneuil beginning Monday.
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