Closing Arguments in Stewart Trial

Telling careful lies but making careless mistakes, Martha Stewart and her broker were bent on keeping investigators from the truth about why she sold stock, a federal prosecutor said Monday.

In a methodical three-hour closing argument, prosecutor Michael S. Schachter told jurors that Stewart and Peter E. Bacanovic believed they would never be caught in their deception.

“But Martha Stewart and Peter Bacanovic were wrong,” Schachter said. “They left behind a trail of evidence exposing the truth about Martha Stewart’s sale and exposing the lies they would tell.”

In his closing argument on behalf of Bacanovic, lawyer Richard M. Strassberg spent more than two hours attacking the credibility of Douglas Faneuil, Bacanovic’s former assistant, who was the government’s star witness.

Stewart, 62, and Bacanovic, 41, face federal charges related to the government’s contention that they lied about why she sold about $225,000 of ImClone Systems Inc. stock on Dec. 27, 2001.

Prosecutors say Bacanovic sent word to Stewart that then-ImClone Chief Executive Samuel D. Waksal and his family were frantically dumping their own shares the day before an expected adverse Food and Drug Administration ruling on ImClone’s cancer drug Erbitux.

Schachter spent much of his argument trying to dismantle the centerpiece of the pair’s defense -- that they had struck a deal before Dec. 27 to sell Stewart’s shares when they dropped below $60.

The prosecutor listed seven reasons jurors would know the $60 agreement was a lie.

Among them: The defendants had no record of having made the plan, other than a worksheet produced by Bacanovic with the notation “[at] 60” next to a reference to ImClone stock -- in a different ink from other marks on the page.

Schachter also listed inconsistencies in the stories Stewart and Bacanovic told federal investigators looking into the ImClone trade in early 2002. He took jurors back to Jan. 31, 2002, four days before Stewart was first questioned about ImClone, when she is alleged to have tampered with a log of a message Bacanovic had left her the day she sold.

Stewart quickly ordered her assistant to restore the message to its original wording, according to the assistant’s testimony. But the fact that she altered it at all is evidence she was worried about why she had sold the stock, Schachter said.

“This event is devastating evidence that she committed the crimes,” he said.

Strassberg, Bacanovic’s attorney, in his closing argument Monday afternoon painted Faneuil as an unreliable witness.

Faneuil initially told the government that he handled Stewart’s stock sale after she asked for a price quote. But he changed his story in June 2002, saying Bacanovic ordered him to pass along the Waksal tip, then pressured him to lie.

Faneuil and the government have a cooperation agreement -- clear motive for him to lie, Strassberg said, even alluding to Sunday night’s Academy Awards by suggesting that Faneuil was acting on the stand.

Strassberg insisted that Faneuil was star-struck by Stewart and suggested that it was he -- not Bacanovic -- who came up with the idea to tell Stewart about the Waksal selling.

“He lies by just twisting a few little facts, a few key facts,” Strassberg said. “But those facts are crucial.”

Strassberg stressed Bacanovic’s reputation as a trustworthy broker at Merrill Lynch & Co. He said Bacanovic would never have risked his career for the Stewart trade, on which he made just $450 in commissions.