Stewart judge to allow evidence backing prosecution witness

NEW YORK — NEW YORK - The federal judge overseeing the Martha Stewart trial said late yesterday that jurors will be permitted to hear evidence of Douglas Faneuil's conversations with his friends in which he apparently told them he had done something wrong and was worried about it.

Faneuil is the government's chief witness in the prosecution of Stewart, who is charged with obstruction of justice. He is a former assistant to Peter E. Bacanovic, Stewart's former stockbroker, who is being tried with her on charges that also include conspiracy.


"The statements Mr. Faneuil made to his friends were made before the effort" to bargain with the government on his own behalf, Judge Miriam Goldman Cedarbaum said, responding to a defense lawyer's contention that Faneuil had done whatever he could to avoid punishment for himself. "He told his friends he had done something wrong, and had been told to do it, and was now worried because he was pressured to do it."

Faneuil faces a possible prison sentence for his role in what he has described as an orchestrated cover-up of Stewart's December 2001 sale of nearly 4,000 shares in ImClone Systems Inc. She has said her trade was "entirely lawful," and was the result of an agreement she and Bacanovic had made earlier to sell if the price dipped below $60 a share.


Faneuil testified this month that Bacanovic told him to tell Stewart that members of the Waksal family, then running ImClone, were dumping their shares on Dec. 27, 2001. Stewart sold her stake minutes later. Faneuil also testified that Bacanovic initially said the trade was made to offset profits from other sales in Stewart's portfolio and later switched to the $60-a-share story.

Cedarbaum said that in his conversations with his friends, Faneuil had implicated himself and Bacanovic. Those conversations have been alluded to in court.

"Your thrust during cross-examination was that he was lying when he inculpated himself because he wanted to curry favor with the government," she told David Apfel, a lawyer for Bacanovic, after the jury had been excused for the day.

Instead, she ruled, what he told his friends amounts to "a prior consistent statement when he had no belief that he needed to curry favor with the government."

The judge also dealt a blow to the prosecution yesterday, ruling that an early-morning call between Bacanovic and Stewart on the day she was scheduled to meet with investigators for the first time could not be construed by the jury as anything but talk or efforts to talk. The call was made at 7:09 a.m. on Feb. 4, 2002, and is listed as one example of the alleged conspiracy between the defendants.

"The government cannot prove the substance of these conversations, what was said, solely through the records," Cedarbaum told the jury.

Telephone records culled from cell phones, business lines, home telephones and car phones owned by Stewart, Bacanovic, Faneuil and others were the focus of much of the testimony yesterday.

Michael Ryan, a special agent with the FBI, testified that he sorted through volumimous phone records in tracing calls between people involved with ImClone trades on Dec. 27, 2001.


The government was also not allowed to use the complete form of a graphic that prosecutors had assembled for the jury.

It originally showed cell phone and land-line calls between Stewart, Bacanovic and Faneuil, and e-mail messages from Bacanovic and Faneuil. By the time it was flashed on the courtroom screens, the e-mails had been blacked out, leaving only the phone messages symbolized by tiny cellular phones or pushbutton desk phones.

On cross-examination, Ryan acknowledged that he had no way of knowing whether any of the people who owned the phones took part in the calls that he detected.