X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The attorney for Martha Stewart tried to move broker’s assistant Douglas Faneuil over to the defensive Monday, asking the government’s key witness why he never raised the issue of insider trading with Stewart. Attorney Robert Morvillo portrayed Faneuil as unwilling to object when ImClone Systems Inc. founder Samuel Waksal and his family started unloading millions of dollars of shares in the company, with the 28-year-old broker’s assistant obligingly telling Stewart about the Waksal sales and helping her sell 3,928 shares of her own. “Did you think it was your responsibility as an employee of Merrill Lynch that if one of your customers was violating the law you should bring it to their attention?” asked Morvillo of Morvillo, Abramowitz, Grand, Iason & Silberberg. Morvillo followed by asking why, after fielding several calls from Waksal’s accountant and his daughters regarding the ImClone sales, Faneuil did not tell his own boss, co-defendant Peter Bacanovic, “about your suspicions?” Faneuil said he was never allowed to get to that point because immediately after he told Bacanovic in a phone call that the Waksals were selling, Bacanovic interrupted him and said, “Oh my God! Better call Martha.” “I think you are trying not to answer my question,” Morvillo said. “Did you tell Peter Bacanovic you had a suspicion that the Waksals were trading on inside information?” “No, I didn’t,” Faneuil answered. Samuel Waksal eventually pleaded guilty to trading on inside information about negative news from regulators about the application for ImClone’s anti-cancer drug Erbitux. The government’s probe of Waksal’s blatant lawbreaking led them to Stewart, who, while not charged with insider trading, is accused of conspiring with Bacanovic to obstruct the probe and then lying about her behavior to investors in her own company, Martha Stewart Living Omnimedia. Faneuil’s cross-examination and brief redirect by lead government prosecutor Karen Patton Seymour brought to a close testimony that spanned four days of the trial. At its culmination, Morvillo returned to Faneuil’s cooperation agreement with the government. Faneuil was allowed to plead guilty to the misdemeanor of accepting extra compensation from Bacanovic and another Merrill Lynch employee in return for withholding the truth. In exchange, Faneuil agreed to help with the prosecution of Stewart and Bacanovic for conspiring to obstruct the investigation into her reasons for selling the stock. Morvillo walked Faneuil through “five, six or seven” potential felonies committed by Faneuil, saying the total number depended “on how many times you used narcotics.” The crimes Morvillo recounted included the disclosing of the Waksal sales to Stewart, the making of false statements to the Securities and Exchange Commission and the U.S. Attorney’s Office, and obstructing an agency proceeding or obstructing justice. Morvillo asked whether Faneuil believed that all of those potential crimes were “washed aside” by his cooperation agreement, adding that, in place of those crimes “you have pleaded guilty to a single misdemeanor” that made a prison sentence unlikely. Morvillo also returned to a theme pressed by Bacanovic lawyer David Apfel last week. Apfel jumped on Faneuil for joining the alleged cover-up and then refusing to follow his lawyer’s advice to tell the truth to the SEC — all the way from January 2002 until June 26 of that year. The point, Apfel insisted, was that Faneuil’s claim that a troubled conscience prompted his change of heart was an invention, and that he only struck a deal with the government because news stories began breaking about the Stewart sales and Faneuil’s future was in peril. Like Apfel, who made a point of counting out the months during which Faneuil kept his silence, Morvillo counted out the days between June 10, when Faneuil hired a new attorney, and June 26, when he finally came clean to the government. Morvillo also set out to distance Stewart from the alleged conspiracy without stepping on the toes of the Bacanovic defense. He repeatedly asked Faneuil if Bacanovic told him to lie — first to tell investigators that Stewart sold her stock for tax reasons, and then to tell them that Stewart and Bacanovic had agreed in advance to sell ImClone if the share price fell to $60. But Faneuil, who claims he was “intimidated” and “scared” by Bacanovic, never had to answer those questions directly, either in a Jan. 3, 2002, phone conversation with the SEC or later in a March 2002 meeting at the U.S. Attorney’s Office. “Did he threaten you,” Morvillo asked. “Did he say ‘You must tell this story’? Did he tell you, ‘You’ve done something wrong and therefore you have to engage in a coverup,’?” Faneuil said “No,” and then conceded he never spoke to Stewart about the conspiracy. “You were never asked by Ms. Stewart to lie, were you ?” Morvillo said. “Correct,” said Faneuil. While Faneuil has proved to be an effective and almost unflappable witness, he appeared to tire Monday as he paused for long periods to consider the questions posed by Morvillo. Morvillo also managed to curtail Faneuil’s habit of interjecting self-supporting comments after giving the required “yes or no” answer to questions on cross-examination. Morvillo asked Judge Miriam Goldman Cedarbaum to tell the witness to stop making “a speech.” Morvillo tried to show Faneuil was trying to have it both ways: claiming he did nothing wrong himself, but that any illegal actions he committed were at the behest of Bacanovic. “So when you gave that information to Ms. Stewart, you didn’t think you were doing anything wrong?” Morvillo asked. “I would say that, because Peter told me to do it, I didn’t think I was doing anything wrong,” Faneuil responded. Later in the day, Ann Armstrong, Stewart’s personal assistant at her offices on 42d Street, took the stand to begin testimony that is expected to detail how Stewart changed a phone log marking a call from Bacanovic that was made on Dec. 27. But Armstrong’s testimony ended before the critical point could be reached as she broke down and became emotional while recalling how Stewart had called in for her messages on Dec. 27 and Armstrong had thanked her boss for sending a plum pudding.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.