Stewart’s Broker Heard on Tape

Jurors in the Martha Stewart trial listened for more than an hour Wednesday to a recording in which her stockbroker recounted to investigators his version of why the entrepreneur sold ImClone Systems Inc. stock.

Jurors wore wireless headphones to listen to the interview of broker Peter E. Bacanovic by the Securities and Exchange Commission on Feb. 13, 2002.

On the tape, Bacanovic denies any advance knowledge of the bad news that sent ImClone shares plummeting just after Stewart sold on Dec. 27, 2001.

He describes a conversation a week before the sale in which he asked Stewart: “How low does this have to go before you’re prepared to part with it?” He said Stewart didn’t know, so he suggested $60 per share.

The prosecution, which introduced the tape, contends that the $60 story is a lie. Bacanovic’s assistant testified earlier that the broker ordered him to alert Stewart on the day that the family of ImClone Chief Executive Samuel D. Waksal was selling.

Earlier Wednesday, Robert Morvillo, Stewart’s lawyer, tried to show that SEC enforcement lawyer Helene Glotzer gave biased testimony because she had a rooting interest for the government.

Morvillo also tried to draw out details of Glotzer’s close work with the federal prosecutors handling the case. The SEC, prosecutors and the FBI routinely conduct joint white-collar investigations.

“Is it your hope that the government wins this case?” Morvillo asked.

“Yes,” Glotzer said. “I believe in the case.” But she stressed she was a “fact witness” who had no bias in her testimony.

Prosecutors have placed Glotzer on the stand in hopes of laying the foundation for what they say are repeated lies by Stewart in 2002 about why she sold the 3,928 shares of ImClone stock.

Stewart told the SEC in 2002 that she did not remember being tipped that Waksal was trying to dump his shares on the same day that she did, according to Glotzer’s testimony.

Stewart also claimed in two SEC interviews that stockbroker Bacanovic handled her sale of ImClone that day. It was actually Bacanovic’s assistant, Douglas Faneuil, who took the order.

Under questioning from Morvillo, Glotzer said the SEC had not provided Stewart a form before a February 2002 interview that advises interviewees that lying to the agency is a crime.

But under questioning from prosecutor Michael Schachter, Glotzer said the SEC routinely does not provide the form when it conducts joint interviews with prosecutors. And she said Stewart was clear on what the agency expected.

Morvillo petitioned the judge Wednesday to let him argue that Stewart’s sale was not an act of insider trading.

He wants to show Stewart never believed she made an insider sale -- and therefore had no motive to lie.

But the judge, worried that jurors will become confused about the actual charges against Stewart, was cool to the request.

While Stewart is charged with obstruction of justice and securities fraud, she is not charged with insider trading.

Prosecutors do not allege she had advance word of the ImClone news, only that she knew the Waksal family was dumping its stock.