Ex-Merrill Assistant Faneuil Steady Under Questioning
Updated from 1:02 p.m. EST
The kid kept his cool.
In a day of questioning that touched on everything from his professional ethics to personal drug habits, former
Merrill Lynch
broker's assistant Douglas Faneuil stuck to his guns, telling the jury in the Martha Stewart trial that he was the victim of a plot involving his boss and one of the most famous women in the country.
Under intense questioning from defense lawyer David Apfel, the 28-year-old former broker's assistant coolly reconfirmed his story that he was intimidated to join in a conspiracy with Merrill Lynch broker Peter Bacanovic and Stewart to conceal from
Securities and Exchange Commission
investigators what happened the day of Stewart's sale.
Bacanovic and Stewart are accused of obstruction of justice and other crimes for allegedly lying to investigators about the circumstances surrounding Stewart's
ImClone Systems
(IMCL)
stock divestiture, which came days before the stock was hammered by a regulatory setback.
Apfel tried to paint Faneuil as an admitted liar being directed by government lawyers desperate to make a case against Stewart and Bacanovic.
"The government has tremendous leverage over you," said Apfel.
"I guess you could put it that way," said Faneuil.
In testimony earlier, Faneuil portrayed himself as caught hopelessly in the middle of a conspiracy by Stewart and Bacanovic to conceal the truth about her sale of about 4,000 shares of ImClone. He described a phone call from Stewart on Dec. 27, 2001, in which he told her that Bacanovic had instructed him to inform her that ImClone founder Sam Waksal was selling all his shares.
"I told her
Stewart with 100% surety that Sam was trying to sell," he said as he was questioned by Assistant U.S. Attorney Karen Seymour.
Apfel hammered home the point that Faneuil lied to the SEC numerous times between Dec. 27, 2001, and June 26, 2002, the date he agreed to be a government witness against Bacanovic and Stewart. Through questioning, he depicted a scared young man whose testimony is meant to curry favor with a government that has yet to sentence him for crimes to which he already has confessed.
"I would not lie for my liberty," Faneuil declared. But asked if he was ever intimidated by Bacanovic, Faneuil replied, "Yes."
Faneuil earlier had explained why he finally decided to spill his story to the government.
"There came a point in time when I couldn't continue to lie," he said. "I felt the cover up was part of my daily existence and I couldn't take it anymore."
When asked by Seymour why in his first meeting with the SEC in January 2001 that he skipped over his discussion with Martha Stewart about Waksal's ImClone sales, Faneuil said, "I was afraid."
According to Faneuil's testimony, Peter Bacanovic attempted to lessen that fear in numerous meetings with his assistant after Bacanovic returned to the office on Jan. 7, 2001.
"Peter called me into his office and said 'Listen, I've spoken to Martha. Everyone is telling the same story. We're all on the same page. It was a $60 stop-loss order. And it's the truth,'" said Faneuil.
In another meeting in Bacanovic's office later that month, after Faneuil returned from a week's vacation -- a vacation that the government is trying to contend was a Merrill Lynch favor to him -- Faneuil said he first saw the trade report which had the $60 limit written in ink next to Stewart's IMCL order. The sheet is a key piece of evidence for the government, which will eventually contend that the $60 was written on the sheet much later than Dec. 27, 2001.
"Peter called me into his office and said, 'Look what I found,'" Faneuil said. "I immediately saw the $60 dollars
written on it. He said 'See?' I said 'Yeah, I see.' "
The morning session reviewed the harried events Faneuil faced on Dec. 27 before launching into what turned into a January full of meetings with both Bacanovic, Merrill Lynch lawyers and SEC officials.
According to Faneuil's testimony, Stewart called the young assistant the day of her sale while she was on a runway en route to a vacation in Mexico. After she identified herself, Faneuil said he gave her the Waksal tip, at Bacanovic's urging. Waksal is now serving prison time after pleading guilty to passing inside information to family members. He is not accused of passing inside information to Stewart.
Faneuil testified that Stewart asked him the price of the stock, and then said: "I want to sell all my shares." The broker's assistant said he suggested putting a limit order on the stock, a move that would trigger a trade when it fell to a certain price.
Faneuil told the court Stewart said, "No, I want to sell at market price." He also said Stewart explicitly instructed him not to confirm the trade with Annie Armstrong, her personal assistant.
"Absolutely not," was her answer, according to Faneuil's testimony. "She said, 'You can't tell Annie anything that goes on in my account.' "
After the stock sale, which grossed Stewart about $240,000, Faneuil said he tried to tell Bacanovic that, as the middleman in the frantic transaction, he alone seemed to know exactly what happened that morning.
"'Doug, no you don't,'" Fanueil quoted Bacanovic as saying. Faneuil said Bacanovic put his hand on Faneuil's shoulder as he spoke.
During an internal meeting about the trade on Dec. 31, Faneuil said his boss was creating his own version of the events the week before.
"Peter kept cutting me off," Faneuil said. "He kept repeating that it was tax-loss selling. Then there was silence. Then he said 'OK?' So I said, 'OK.'"
Faneuil said his boss repeated the tax-loss assertion several times, and that Faneuil assented.
Faneuil said he also had a later conversation with Heidi DeLuca, Stewart's business manager, in which she said the gains from the ImClone sale had derailed her tax-loss selling strategy.
"She said, 'Martha's going to have to pay taxes,'" Faneuil testified.
Before his dramatic testimony before the jury, Faneuil got a taste of his cross-examination by defense attorneys Robert Morvillo and Richard Strassberg when he had to tell U.S. District Court Judge Miriam Goldman Cedarbaum about his previous drug use.
He said he smoked marijuana with friends "about once a month," and admitted using Ecstasy two or three times, but said he never mixed drug use with work.
The jury wasn't allowed to hear about Faneuil's drug use until later in the day. During the lunch break, the defense presented casework to sway Judge Cedarbaum into limited use of the discussion of Faneuil's drug use. She also made sure that the defense kept the line of questioning about his drug use, which included cocaine "once or twice" in the past five years, to a minimum.
She often interrupted Apfel by announcing, "Let's move on."