The big development in Martha Stewart's obstruction trial on Monday came when the judge ruled the government's star witness will take the stand Tuesday, two days earlier than previously expected. Beyond that, Monday's day of testimony might be called
Revenge of the Underlings
when the television miniseries is finally finished.
The testimony of former
broker's assistant Douglas Faneuil was delayed last week when Stewart's defense received a memo that sowed confusion about parts of Faneuil's story.
In the memo, Faneuil's former lawyer, Jeremiah Gutman, gave two different accounts of who Faneuil clamed ordered him to give Stewart the perfectly timed stock tip that is at the heart of the government's case against her.
Faneuil's testimony was initially postponed until Thursday, but was moved up without elaboration in a ruling issued by U.S. District Judge Miriam Goldman Cedarbaum on Monday.
As far as Monday's testimony, the first witness was Emily Perret, former assistant to former
CEO Sam Waksal. Perret called the founder of
Martha Stewart Omnimedia
"hurried, harsh and direct" when she called ImClone on Dec. 27, 2001, to find out why members of the Waskal family were selling and shuffling their shares of the biotech company.
"I remember speaking with Martha and she said to 'get Sam,' or 'where is Sam?'" Perret said. "'This is Martha. Something's going on with ImClone and I want to know what it is. Go find him.'"
Waksal and members of his family were selling shares because they learned the Food and Drug Administration had rejected Erbitux, the company's principal cancer drug. Sam Waksal, the founder and former chief executive of ImClone, is now serving a seven-year federal prison term for insider trading.
Perret also recounted Waksal's requests to alter phone messages and change letters and other documents before the company was investigated.
"I started deleting messages," she said. But as government lawyers and investigators inspected the offices, "I started to feel like by doing something that my boss asked me to do, I felt like it wasn't the right thing for me to do," she testified.
Perret received immunity from prosecution in exchange for her testimony in Waksal's case, and in the subsequent case against Stewart and her stockbroker at Merrill, Peter Bacanovic. The two face charges of obstruction of justice and conspiracy. Stewart faces charges of securities fraud and a civil charge of insider trading. Bacanovic faces the same charges, except he isn't charged with securities fraud and is charged with perjury.
The next witness, Brian Schimpfhauser, a surveillance analyst in Merrill's compliance department, recounted how on Dec. 31, 2001, he spotted suspicious ImClone trades by Waksal's daughters, Alana and Eliza, followed by trades by Stewart.
"I noticed the last name of Waksal ... and immediately some bells and whistles started going off in my head," Schimpfhauser told the jury. "There's some potential problems there."
Stewart, who sat flanked by lawyers at the defense table, was more active than previous days, scrutinizing documents as they were projected on a screen for jurors, and even chatting briefly with Bacanovic during a brief break.
Schimpfhauser also noticed Stewart's trades, and trading documents identified her as a "key client" of Merrill's, someone with more than $250,000 invested with the firm.
Prosecutors asked about the firm's initial response to the suspicious trades, which included meetings with Bacanovich, in-house counsel David Marcus, Rockefeller Center branch administrative officer Judy Monaghan and Schimpfhauser's immediate supervisor, Steven Snyder.
Prosecutor Karen Seymour asked if Snyder, who may be called to testify, had assumed an emotional tone, shouting that "heads will roll" and "someone is going down for this."
Schimpfhauser, who had worked as a full-time surveillance analyst for only six weeks before the meetings in early January 2003, said he did not take detailed notes and could not remember. He added that his former boss' personality had a few rough edges.
"A lot of people view him as almost obnoxious," Schimpfhauser said. "He was very intimidating from the first day I met him. But that's his personality. He's a wonderful guy."
In a peculiar aside to the celebrity trial, former talk show host Rosie O'Donnell sat behind Stewart in the public gallery during the afternoon session, saying she had come to show support. While she said she and Stewart were not close friends, the defendant had been a guest on her talk show. O'Donnell called the charges "absolutely absurd."
"She's someone I admire and respect; she's a wonderful woman on many levels," O'Donnell said. "I don't think in any way, shape or form that she would have been prosecuted for this if she were not a woman."
O'Donnell later leaned over a courtroom barrier at the end of the day to chat briefly with Assistant U.S. Attorney Michael Schacter, who led the cross-examination of Monaghan at the end of the day.
"I tried to bribe him with candy," she said as she left the courtroom. "It didn't work."