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An attempt by the defense in the Martha Stewart obstruction trial to undercut the credibility of the key witness by calling his former lawyer to the stand made little headway Monday. Attorney Jeremiah Gutman refused to directly contradict the words of his client Douglas Faneuil, a critical witness who had testified that Gutman advised him, “Don’t lie, but stick to your story” in March 2002, when Faneuil was set to meet with federal investigators for more questioning about Stewart’s sale of ImClone Systems stock. Faneuil, 28, had testified that he was intimidated by his boss, Stewart’s broker and co-defendant Peter Bacanovic, into telling investigators that Stewart had a standing agreement to sell her remaining 3,928 shares of ImClone stock when the price fell to $60. Prosecutors allege the story was a cover-up for the real reason Stewart sold her stock: that she had learned from Faneuil on Dec. 27, 2001, that ImClone founder Samuel Waksal and his family were selling millions of dollars of their own shares in the company. The alleged cover-up prompted prosecutors to charge Stewart and Bacanovic with, among other things, a conspiracy to obstruct justice. But Bacanovic attorney David Apfel on Monday presented Stewart business manager and self-described friend Heidi DeLuca to counter Faneuil’s claim that the $60 agreement was an invention. DeLuca said she recalled a conversation with Bacanovic in November 2001 in which he said ImClone was “a dog,” and that he would soon be in touch with Stewart about setting a floor price at which the stock would be sold. Faneuil had also described in testimony his conversation with Gutman after he first was questioned by the Securities and Exchange Commission about the sale in January 2002. Gutman, Faneuil said, had told him to go to back to the authorities and tell the truth. But an emotional Faneuil said he was not ready to make that leap, and ended the conversation promising only to consider his attorney’s advice. Faneuil later related the March 2002 exchange with Gutman, when he learned the lawyer had spoken with Merrill Lynch in-house attorney David Marcus. Marcus assured Gutman that Merrill Lynch was trying to resolve issues with federal investigators working on the ImClone probe. The impression he got from Gutman, Faneuil said, was that Merrill Lynch had a deal with the government in which Stewart would be spared, but Waksal would be served up on “a silver platter.” It was then that Faneuil said he asked Gutman whether his advice had changed, and was allegedly told, in response, “Don’t lie, but stick to your story.” Faneuil hired another lawyer in June 2002, shortly before he decided to go to the government, tell them about the alleged cover-up and negotiate a cooperation agreement. Monday, Bacanovic’s attorney Richard Strassberg called Gutman to the witness stand hoping the veteran civil rights attorney would undermine Faneuil’s account of their March conversation, if not totally contradict it. But when Strassberg asked him whether Faneuil’s version of the March conversation was accurate, the best Gutman could offer the defense was “not quite.” “I told him he should not lie, as I continued to tell him every time we spoke,” Gutman said. Gutman then said he also “warned” Faneuil that there would be consequences if he told the government one thing one day and the opposite the next. “So that if he were to make a statement inconsistent with what he had said before he would be sticking his neck out and, therefore, I recommended that he have independent counsel, who will advise him on whether or not he should take the Fifth Amendment,” Gutman said. Strassberg’s questioning of Gutman, which came during the first full day of the defense case presented by Bacanovic, was sharply circumscribed by Judge Miriam Goldman Cedarbaum, who has kept a tight leash on attorneys for both sides since the trial began more than three weeks ago. Strassberg was not allowed to go into great detail with the attorney about Faneuil’s general recollection about what he was told about the conversation between Gutman and Marcus. BRIEF SIDEBAR At a sidebar held while Gutman on the witness stand, Judge Cedarbaum said she would not permit Strassberg to question Gutman on subjects beyond what he told his client about the Marcus conversation and whether he actually said, “Don’t lie, but stick to your story.” “Just that,” the judge said, “Because all of this is collateral. None of this is normally admissible because it does not go to the issues in the trial. And you can’t normally impeach a witness extrinsically except by prior inconsistent statement if all you are trying to do is undermine his veracity.” “This is not a general exploration,” the judge said. Earlier, the judge said she was reserving decision on defense motions to dismiss a securities fraud charge and other charges against the pair for insufficient evidence. The Associated Press contributed to this story.

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