Defense Witness Undermines Case Against Martha

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Defense Witness Undermines Case Against Martha
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Stewart Witness Undermines Government's Case
Business Manager Says Broker Mentioned Selling at $60 Weeks Before Sale
By ERIN McCLAM, AP

NEW YORK (Feb. 24) - A defense witness bolstered Martha Stewart's case when she said the domestic diva's stockbroker had discussed plans to dump her ImClone Systems stock before it fell to $60 - weeks before she actually sold.

The testimony by Heidi DeLuca, a business manager for Stewart, supports the key element of the defense - that Stewart and broker Peter Bacanovic had a pre-existing plan to sell her 3,928 ImClone shares.

The government contends the $60 plan was a cover story, devised after investigators started looking into the sale. Prosecutors say Stewart sold because she was tipped that ImClone founder Sam Waksal was selling his shares.

But DeLuca testified Monday that Bacanovic expressed a desire to get rid of the shares in a conversation on Nov. 8, 2001. That was weeks before Stewart sold the stock on Dec. 27, 2001.

''He told me he felt ImClone was a dog,'' she said. ''He felt he could set a floor price of $60 or $61 just in case the stock continued to fall, as a safeguard.''

DeLuca said she was discussing the matter with Bacanovic because she was handling the transfer of Stewart's ImClone shares from another bank to Merrill Lynch & Co., where Bacanovic worked.

Stewart and Bacanovic are accused of repeatedly lying to investigators about the circumstances of the ImClone sale. They are charged with conspiracy and obstruction of justice, among other counts.


the testimony Monday came as Stewart got support from Bill Cosby, who wore sunglasses as he sat next to her daughter in the courtroom. Asked by reporters why he showed up, Cosby said: ''I'm here for a friend.''

Earlier Monday, a former lawyer for Douglas Faneuil, Bacanovic's assistant and the government's star witness at the trial, took the stand and bolstered key elements of Faneuil's testimony.

Jeremiah Gutman, who was retained by Faneuil in early 2002, was called as a witness by lawyers for Bacanovic. But he appeared to boost some of the main assertions Faneuil gave for the prosecution.

Faneuil has testified he passed a tip from Bacanovic to Stewart on Dec. 27, 2001, that ImClone Systems CEO Sam Waksal was unloading his shares of ImClone stock.

Faneuil first supported Bacanovic and Stewart, then changed his story in June 2002 in a cooperation deal with the government.

Earlier in the trial, Faneuil testified that Gutman had told him he knew about a deal between Merrill Lynch and the government to ignore any wrongdoing by Stewart and hand over Waksal ''on a silver platter.''

The defense has tried to discredit that story. But Gutman testified Monday that, while he did not use those words, he told Faneuil ''something like that.''

Gutman said a Merrill official ''had told me that he was working on making a deal and that deal would involve getting all Merrill Lynch people off the hook, and let the chips fall where they may.''

Calling Gutman, an 80-year-old civil rights lawyer, was something of a risk for Bacanovic's attorneys. He repeatedly declined to meet with them before the trial.