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Broker’s assistant Douglas Faneuil’s reasons for becoming the government’s lead witness in the Martha Stewart obstruction case were attacked relentlessly Thursday by counsel for Stewart’s broker and co-defendant, Peter Bacanovic. For almost 5 1/2 grinding hours, attorney David Apfel worked to show that Faneuil stopped lying to the federal government and pleaded guilty to his role in the Stewart stock sale scandal to save his own skin. The words “lying” and “jail” were used by Apfel throughout the day as he tried to shake Faneuil’s story, which was that his boss, Bacanovic, told him to warn Stewart that ImClone Systems Inc. founder Samuel Waksal and his family were selling millions of dollars of ImClone shares based on inside information in December 2001. Apfel repeatedly led Faneuil along the critical timeline stretching from Dec. 27 through a coverup Faneuil said he joined at the behest of Bacanovic, and up until June 2002, when Faneuil decided to break with the conspiracy, get a new lawyer and reach a cooperation agreement with the government. Bacanovic and Stewart tried to cover up the tip about the Waksal sales with a story that she planned to sell her ImClone shares once they fell below a certain price, according to Faneuil and prosecutors. Apfel tried to paint Faneuil as a star-struck broker’s assistant who was “fixated” with Stewart — someone who was willing to tell lies to the government in return for extra compensation from his boss and others at Merrill Lynch until it became increasingly clear that the scandal was about to explode. “You just woke up one day and decided to tell the whole truth?” Apfel asked sarcastically. “It wasn’t a moment of revelation as I described earlier,” the 28-year-old former Merrill Lynch assistant said. “It was a process. … I decided I needed a new lawyer. … I decided not to continue with the conspiracy.” Faneuil eventually pleaded guilty to a misdemeanor for accepting a “thing of value” — extra pay and more vacation time — in return for refraining from telling the government the truth about the ImClone sales. Apfel focused on Faneuil’s October 2002 guilty plea and his cooperation agreement with the government, trying to prove Faneuil only escaped potential felony charges because he was committed to helping prosecutors nail Bacanovic and Stewart on obstruction and other charges. In June 2002, as articles began appearing in newspapers about the investigation of Stewart, Apfel asked, “Weren’t you becoming more and more convinced that unless you came forward, you were going to be found out?” And when Faneuil said “no,” Apfel asked him whether, if the investigation progressed, federal investigators were “going to be more interested in Peter Bacanovic and, certainly, Martha Stewart than they would be in Doug Faneuil?” Faneuil again denied that he changed course because he realized his way out depended on his ability to implicate Bacanovic and his most high-profile client. He also insisted, “I didn’t know how much trouble I might be in — my decision to come forward wasn’t based on my desire to avoid jail time. “I never thought of my cooperation against anybody,” he added. “I thought of it as my obligation to tell the truth.” Apfel also strove to show that personal animus toward Stewart played a role in Faneuil’s decision to turn government witness. He acknowledged being treated rudely by Stewart during a handful of phone conversations with the client in the fall of 2001. Faneuil was forced to make that concession after Judge Miriam Goldman Cedarbaum ruled that e-mails, or parts of e-mails, that Faneuil sent to friends after his conversations with Stewart could be introduced into evidence. The defense had decided that the potential harm of introducing the e-mails, which do not flatter Stewart, was far outweighed by the chance to paint Faneuil as a young man with an axe to grind. In one e-mail, Faneuil said that Stewart assumed she was speaking to Bacanovic when she was actually speaking to Faneuil. “She said, ‘Do you know who the hell is answering your phones? You call and you know what he [Faneuil] sounds like? He sounds like this’ and then she made the most ridiculous sound I’ve ever heard coming from an adult in quite some time, kind of like a lion roaring underwater. I laughed; I thought she was joking. And then she yelled ‘This is not a joke!!! Merrill Lynch is laying off ten thousand employees because of people like that idiot.’ And then she hung up.” In another e-mail he wrote, “Martha yelled at me again today, but I snapped in her face and she actually backed down. Baby put Martha in her place!!!” The trial is expected to resume on Monday with cross-examination by the Stewart team led by Robert Morvillo and redirect by the prosecution team of Karen Patton Seymour and Michael Schachter.

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