Skip to comments.Stewart Friend Drops Bomb (
Posted on 02/19/2004 4:06:38 PM PST by jimbo123
Martha Stewart told a traveling companion that she knew about Sam Waksal's frantic efforts to unload shares of ImClone Systems in December 2001, according to testimony Thursday in Stewart's criminal obstruction trial.
Stewart told Mariana Pasternak that she knew Waksal "was trying to sell his stock, that his daughter was trying to sell her stock, that Merrill Lynch refused to sell," Pasternak testified in federal court in Lower Manhattan. The account casts more doubt on Stewart's claim to have sold the stock under an informal stop-loss agreement with her broker.
Merrill Lynch refused to allow Waksal to transfer his personal ImClone shares into his daughter's account on Dec. 27, 2001, the same day Stewart made her now-famous ImClone trade. The government claims Stewart and her Merrill broker, Peter Bacanovic, lied about why Stewart sold about 4,000 ImClone shares one day before a regulatory setback gutted the stock.
"She said, 'His stock is going down and I sold mine,'" Pasternak said.
Testifying about a conversation she claims occurred with Stewart on the balcony of a Mexican resort on Dec. 30, 2001, Pasternak also said Stewart enthusiastically praised Bacanovic, who prosecutors think ordered an assistant to tip Stewart to sales by Waksal's family.
"She said, 'Isn't it nice to have a broker who tells you these things?'" testified Pasternak, the Westport, Conn., realtor with whom Stewart vacationed.
Pasternak's testimony is the most explicit evidence jurors have heard about what Stewart knew, buttressing the account given earlier in the trial by Bacanovic aide Douglas Faneuil. It could increase the pressure on her defense team to put Stewart on the stand, a prospect that was broached earlier Thursday by defense attorney Robert Morvillo.
"Should Miss Stewart testify on behalf of the defense, I think the defense will be fairly broad-based," Morvillo said.
Stewart and Bacanovic face up to 5 years in jail if convicted of obstructing justice with their story that the ImClone shares were sold under an informal stop-loss agreement that kicked in when the stock fell below $60. Stewart is also accused of securities fraud, which carries a potential 10-year sentence, on grounds her claims of innocence were a plot to prop up the stock Martha Stewart Living (MSO:NYSE) , the company she founded.
Pasternak's bombshell came after a day in which Stewart's lawyers appeared to be making progress. Earlier, the government's efforts to paint Stewart as cheap ran into trouble Thursday when the judge barred testimony about a $17,000 limousine bill.
Judge Miriam Goldman Cedarbaum barred testimony from Martha Stewart Living CFO James Follo that prosecutors said would show that Stewart, who had a reputation for micro-management, had a liberal interpretation of expense reports.
Before Cedarbaum's ruling, Follo told the courtroom about Stewart's $17,000 bill for weekend limousine charges between spring 2001 and spring 2002 -- and about his concerns that some of the trips were personal antique expeditions. Follo also said he raised questions with Stewart about whether her $200 haircuts were really just for television.
Cedarbaum rejected the government's line of questioning as excessive, saying, "I think it's an elephant bringing forth a mouse." A consequence of the ruling could be to limit the ability of defense lawyers to persuade jurors Stewart was too busy with a $45 million Martha Stewart Living stock sale to worry about the 4,000-share trade at the center of her criminal case.
Prosecutors had planned to use Follo as part of a larger strategy to refute the defense's claim that Stewart is too rich to care about the relatively small amount of money involved in her ImClone transaction. The thesis pertains both to her obstruction charges and to the securities fraud count, in which prosecutors contend Stewart's frequent claims of innocence amounted to a plot to prop up her own company's stock.
Morvillo is expected to try to get the fraud count thrown out when the prosecution's case is finished, possibly this week. The allegation suffered what many thought was a fatal blow last week when Cedarbaum barred the testimony of expert witnesses who would have said Stewart's proclamations affected the price of Martha Stewart Living.
The prosecution tried to revive that case Thursday, calling Bear Stearns securities analyst Kevin Gruneich to the stand. Gruneich read aloud from a Martha Stewart Living prospectus that said the company's reliance on Stewart's personality was among its biggest risks. Her image was "integral" to the marketing of the brand, he said.
While the fraud charge carries a larger sentence, the obstruction charge has appeared the more viable after Stewart's lawyers were unable to discredit the testimony of Bacanovic's assistant last week. Doug Faneuil's testimony backed up the government's claim that Stewart sold after Faneuil tipped her to selling by ImClone's founder Sam Waksal -- not because of any informal stop-loss agreement.
Prosecutors are expected to wind up their case Friday or Monday.
That depends on which broad they base it on...
OK, I understand the obstruction of justice charges and, in my experience, I think that the prosecution has a decent shot on that.
But I find the securities fraud charges tenuous, at best, and am wondering why they didn't hit her with insider trading charges. Given her relationship with the Waksals and her past experience as a stockbroker, that would seem to be a valid charge.
She is a former stockbroker and the head of a publicly-traded company. Damn right she knew that was illegal!
And his sources better be impeccable and unimpeachable.
Damn, I watch entirely too much Brit Hume.
That depends on which broad they base it on...
"What's gray and has a trunk?"
"Objection! That's irrelevant."
She pays $200 for that 'do? Mine looks better and I pay $12.00 (plus tip, of course) at Great Clips.
Mariana and her doctor husband are god-parents to one of Martha's children.
Don't you think the government checked her out and knew immediately that they also sold their stock....probaly gave her immunity to tell the truth about what Martha did and said?
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