New York, NY, Feb. 18--Friends of the star witness in the Martha Stewart trial will be allowed to tell jurors what he confided to them just after the domesticity maven dumped ImClone Systems stock, a judge has ruled.
The friends are expected to testify that Douglas Faneuil told them in early 2002--long before he began cooperating with the government--that he had done something wrong, and possibly that he had been pressured to do it.
At the same time, Faneuil was telling federal authorities that he simply gave Stewart a stock quote on Dec. 27, 2001, then followed her orders to sell all her 3,928 shares of ImClone.
He changed his story in the summer of 2002, claiming instead that broker Peter Bacanovic ordered him to tip Stewart that day that ImClone founder Sam Waksal was selling his shares.
Faneuil told the same story earlier this month at Stewart and Bacanovic's trial. Testimony from his friends that he was worried long before he came forward would damage both Bacanovic and Stewart's cases.
"The government is entitled to show that what he told his friends was consistent with what he decided to tell the government in the summer of 2002," U.S. District Judge Miriam Goldman Cedarbaum ruled Tuesday.
Testimony of Faneuil's friends could provide a boost to the government just as prosecutors are wrapping up their case. They told the judge they expect to rest by Thursday.
Earlier Tuesday, the judge blocked prosecutors from putting into evidence a voice mail Bacanovic left for Stewart on Feb. 4, 2002, the day she was first interviewed by the government in the ImClone investigation.
That decision limits the government's ability to prove Stewart and Bacanovic conspired to lie about Stewart's sale of ImClone.
"The fact that he tried to contact her really isn't evidence of anything, other than that they talked to each other sometimes," Cedarbaum said.
The essence of the conspiracy charge is that Stewart and Bacanovic worked together to hatch a cover story for why Stewart sold her ImClone stock.
Prosecutor Karen Patton Seymour argued the voice mail, left just after 7 a.m. on Feb. 4, 2002, is evidence of Bacanovic's state of mind in the alleged conspiracy. Stewart gave the first of two interviews to investigators later that day.
The judge also limited what prosecutors could argue about two other calls between Stewart and Bacanovic on Jan. 25, 2002, the day Stewart was informed that federal prosecutors wanted to speak with her.
Cedarbaum has already ruled prosecutors may not call expert witnesses as they try to show Stewart committed securities fraud. That charge accuses the Stewart of propping up the stock price of her own company, Martha Stewart Living Omnimedia, by falsely claiming she was innocent and cooperating with investigators in the ImClone probe.
The ruling Friday means prosecutors will not be allowed to call stock analysts to show what effect Stewart's statements had on the stock price. They may still be allowed to call individual investors.
