Ex-Aide’s Friends Allowed to Testify

One or more surprise government witnesses in the Martha Stewart trial will testify that former stockbroker’s aide Douglas Faneuil told them after Stewart’s 2001 ImClone stock trade that he had done something wrong and was being pressured to keep doing it, according to arguments in court Tuesday.

Such testimony could hurt Stewart’s codefendant and former stockbroker, Peter E. Bacanovic, whose lawyers contend that Faneuil made up a story implicating Bacanovic to shift blame from himself and curry favor with the government.

The government also suffered a setback Tuesday, when U.S. District Judge Miriam Goldman Cedarbaum barred prosecutors from arguing that the timing of certain phone calls between Stewart and Bacanovic indicated that they were conspiring to mislead investigators about Stewart’s stock sale.

Faneuil, 28, the star prosecution witness, admittedly lied twice to federal investigators in early 2002 and didn’t begin cooperating with the government until June 2002.

It could boost the credibility of the story Faneuil told in court two weeks ago if the new witnesses -- unidentified friends of Faneuil -- said he told them essentially the same thing in early 2002.

It is unclear how the testimony would affect Stewart.

Word of the new witnesses surfaced late Tuesday after Cedarbaum had dismissed the jury for the day and was dealing with lawyers’ procedural wrangling.

Bacanovic lawyer David J. Apfel objected to the introduction of “four new witnesses,” about which the defense was notified only late Monday.

Lead prosecutor Karen Patton Seymour corrected Apfel, saying that only one or two witnesses actually would appear. The government was “still making a selection” among four potential witnesses and would decide later whom to call, she said.

Cedarbaum said prosecutors were allowed to call the new witnesses because Apfel, in cross-examination, had stressed Faneuil’s desire to tell the government what it wanted to hear in exchange for light treatment of his own crimes.

“The government can show he told friends he’d done something wrong, was told to do it and was worried now because he was being pressured to keep doing it,” Cedarbaum said of Faneuil.

Faneuil testified that at Bacanovic’s insistence, he passed Stewart a tip that her friend Samuel D. Waksal, then head of ImClone Systems Inc., was anxiously trying to sell stock in the biotech firm. Stewart immediately sold all her shares for about $228,000. A day later came an adverse regulatory report that caused ImClone shares to dive.