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The cover story that Martha Stewart and her stock broker Peter Bacanovic told about the reason she sold ImClone Systems Inc. stock in 2001 collapses when abundant evidence and a little common sense are applied, a federal prosecutor told the jury at the close of their obstruction trial Monday. Point by point, Assistant U.S. Attorney Michael Schachter walked the jury through the months following Dec. 27, 2001, when he said Stewart and Bacanovic scrambled to conceal that she sold 3,928 shares of ImClone only because she was told company founder and close friend Samuel Waksal and his family were selling, or trying to sell, as much as $7.5 million in shares. “A fabrication designed to fool investigators,” Schachter called the pair’s “plan” to sell her stock if it fell to $60 per share. The transparency of the cover story, he said, was proven both by the points on which their stories converged and on key differences — clumsy discrepancies that were easily revealed at trial because “they just didn’t get their story straight.” While Schachter listed dozens of ways the cover story was undermined, he said there was one reason enough to convict Stewart and Bacanovic: the testimony of broker’s assistant Douglas Faneuil. It was Faneuil who learned the Waksals were selling on Dec. 27 and then passed on the news to his vacationing boss, Bacanovic, who responded by saying “Oh my God, get Martha on the phone.” And it was Faneuil who told the jury that he had asked Bacanovic whether he should tell Stewart about the Waksal sales, with Bacanovic responding, “Of course, you must, that’s the whole point.” Schachter said Faneuil had proven himself, despite attacks on his credibility, to be a forthright witness: a low-level employee who was sucked into the conspiracy by “pretty powerful people” and who did what he was told for six months until he could take it no more and became a witness for the government. The defense, Schachter reminded the jury, had tried to paint the 28-year-old broker’s assistant as “fixated” on Stewart and willing to turn to the government only because he thought he was about to be charged himself in June 2002. Ridiculing this defense tactic with sarcasm, Schachter said the “beauty” of this supposed plan was that Faneuil knew he would lose his job, be charged with a crime, and be banned from the securities industry for life if he became a government witness. DEFENDANT’S CLOSING ARGUMENT Bacanovic’s attorney, Richard Strassberg of Goodwin Procter, took the podium Monday afternoon for his closing argument and immediately set his sights on Faneuil. It was nonsensical, Strassberg said, for Bacanovic to entrust such a delicate matter as telling Stewart about the Waksals to a green assistant. “It makes no sense that Peter Bacanovic would have asked his brand-new assistant to pass confidential information about Sam Waksal to Martha Stewart,” Strassberg said. “It makes no sense, because it didn’t happen.” Strassberg focused on Faneuil’s plea bargain with the government, whereby the broker’s assistant agreed to plead guilty to a misdemeanor and to testify at trial, and in return he will most likely avoid prison. Strassberg said Faneuil’s testimony was based on a series of inferences drawn by a person who “has an extreme motivation to shade the truth.” “He is a person who time and time again exaggerates and embellishes and twists the facts,” Strassberg said, adding that, in covering up his own complicity, Faneuil saw “a conspiracy around every corner.” With Bacanovic on trial for obstruction, conspiracy, perjury and creating a false document, all in the alleged pursuit of hiding the truth from the government, Strassberg said the government “hasn’t come close to meeting its burden.” “This is not a close call, this is not a close case, there is reasonable doubt all over,” he said. Earlier, Schachter had said the holes in the cover story were glaring. He said that Peter Bacanovic never spoke with Stewart before Christmas about selling ImClone as part of a year-end, tax-driven clean up of her stock accounts. And he said that the story from Stewart’s business manager about speaking with Bacanovic in early November about dumping Stewart’s shares never happened. The prosecutor also put to effective use a tape of Bacanovic’s interview with the Securities and Exchange Commission in January. In Bacanovic’s own words, the jury heard for the second time in the trial that the broker “never discussed” individual stock sales in such detail with the business manager, Heidi DeLuca. He argued that DeLuca’s claim that she had in fact spoken with Bacanovic in November — and that a note about ImClone supported her version of events — were belied by the fact that the document was actually dated in October, when she spoke with her broker about unloading some 51,000 shares of ImClone that were in Stewart’s pension fund. Strassberg is due to continue his closing argument this morning, followed by a closing by Stewart’s lead counsel, Robert Morvillo of Morvillo, Abramowitz, Grand, Iason & Silberberg, and finally by rebuttal from prosecutor Karen Patton Seymour.

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