Stewart’s Image Takes Hit From Key Witness

Martha Stewart was described by a former stockbroker’s aide in court here Thursday as a screamer who berated him over petty issues and once threatened to yank her multimillion-dollar investment portfolio away from Merrill Lynch & Co. because she didn’t like the telephone “hold music.”

Douglas Faneuil, the prosecution’s star witness, spent most of the daylong cross-examination fending off attacks on his credibility by David Apfel, lawyer for Faneuil’s former boss, codefendant Peter Bacanovic.

Apfel scored a few points on Faneuil, but Stewart’s refined image took a thrashing along the way.

The defense attempted to paint the 28-year-old Faneuil as a liar and drug user who had a personal dislike for Stewart and was falsely testifying to avoid prison for his own misdeeds -- namely lying twice to federal investigators.

But Apfel had difficulty shaking Faneuil’s story and repeatedly was chided by Judge Miriam Goldman Cedarbaum for haranguing the witness and trying to introduce topics that the judge had ruled out of bounds.

Bacanovic, 41, and Stewart, 62, are charged with lying to federal investigators to cover up the circumstances of Stewart’s Dec. 27, 2001, sale of $228,000 of stock in biotechnology company ImClone Systems Inc. The sale came a day before an adverse regulatory ruling that caused the stock to plunge.

Faneuil testified Tuesday that the sale came after he informed Stewart, at Bacanovic’s urging, that ImClone founder Samuel D. Waksal and his daughters were trying to sell their shares in the company.

Stewart and Bacanovic maintain that they had a prior agreement to sell the stock if it fell to $60 a share.

After hours of repetitious and tedious cross-examination that was apparently annoying Cedarbaum and causing the jury’s attention to wander, Apfel finally grabbed the courtroom’s attention when he began asking Faneuil about two e-mails he’d written to friends in October 2001.

In one message to a co-worker after a phone conversation with Stewart, Faneuil wrote, “I have never, ever been treated more rudely by a stranger on the telephone. She actually hung up on me!”

Stewart, apparently mistaking Faneuil for Bacanovic, said, “Do you know who the hell is answering your phones?” according to the e-mail. Then, Faneuil wrote, Stewart imitated the person she was complaining about, making a noise “like a lion roaring underwater” and yelled, “This is not a joke!!! Merrill Lynch is laying off ten thousand employees because of people like that idiot!”

Three days later, Faneuil wrote to another friend: “Martha yelled at me again today, but I snapped in her face and she actually backed down! Baby put Ms. Martha in her place!!!”

Referring to something Faneuil had told the FBI, Apfel asked about an incident when Stewart became upset while on hold for Bacanovic and said she would “leave Peter Bacanovic and leave Merrill Lynch unless the hold music was changed.”

After Faneuil confirmed the story, the jury of eight women and four men burst out laughing, along with most of the courtroom.

Even Stewart, normally stern-faced at the defense table, appeared to suppress a laugh.

(A Merrill Lynch spokesman said the hold music was classical.)

Faneuil, who now works in a Manhattan art gallery, said that after the federal investigation was launched in early 2002, he grew intimidated by Bacanovic. Asked why he kept sending his boss “jokey” e-mail messages if he was afraid of him, Faneuil said his life had become schizophrenic.

At another point, he said part of his reason for supporting what he called Bacanovic and Stewart’s “cover story” was that “I felt I would be fired if I didn’t lie.”

When questioned by prosecutors earlier this week, Faneuil said he decided to tell the truth to investigators on June 26, 2002, when he could no longer bear the pressure of the alleged coverup.

But Apfel got Faneuil to acknowledge that he was paying close attention to the drumbeat of news that began June 6 with the revelation of Stewart’s ImClone sale.

Although he had not told anyone of his change of heart, Faneuil said that by then he had “pretty much” decided to come forward.

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The Faneuil e-mails about Stewart

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Here are the e-mails sent by Douglas Faneuil to a friend.

Oct. 23, 2001:

“Subj: I just spoke to MARTHA!

I have never, ever been treated so rudely by a stranger on the telephone. She actually hung up on me! And she had the nerve -- the NERVE -- [to] mention the layoffs in her anger. She said, ‘Do you know who the hell is answering your phones? You call and you know what he sounds like? He sounds like 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 then 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.”

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Oct. 26, 2001:

“Martha yelled at me again today, but I snapped in her face and she actually backed down! Baby put Ms. Martha in her place!!!”

*Los Angeles Times