Faneuil Praised, Pilloried in Stewart Summations

Updated from 2:23 p.m. EST

Martha Stewart's fate should turn on the believability of Douglas Faneuil, the 28-year-old former Merrill Lynch clerk who claims to have given her a perfectly timed stock tip at the behest of his boss, lawyers on both sides argued Monday.

If jurors believe Faneuil, "then this trial is over," said prosecutor Michael Schachter in his closing argument. Schachter argued that Faneuil's testimony confers credibility on every count remaining against Stewart and his boss, Peter Bacanovic, in their month-old criminal obstruction trial.

Faneuil's credibility also was the topic of defense lawyer Ricahrd Strassberg's closing argument. Bacanovic's attorney called Faneuil a "convincing liar" whose fascination with celebrity led him to invent a story that would bring down his boss and win him fawning publicity.

Strassberg will finish his closing argument Tuesday and be followed by Robert Morvillo, Stewart's attorney. The jury in the case could begin deliberations as early as Tuesday afternoon.(For a story on the future of Martha Stewart Living ( MSO), the company Stewart founded, click here.)

In a meticulous summation that ran more than three hours, Schachter laid out why the government doesn't believe Stewart had an informal stop-loss agreement with Bacanovic that led her to sell about 4,000 shares of ImClone Systems on Dec. 27, 2001. The stock tanked one day later on an FDA setback.

"Four days after the sale, Bacanovic did not say a word about what is the cornerstone of his defense," Schachter noted, referring to an interview with his Merrill Lynch office manager. "Peter Bacanovic said nothing about a $60 order."

Instead, the government believes Faneuil, who testified Bacanovic ordered him to call Stewart with information that ImClone's founder was trying to sell his own stake in the company. The co-defendants face five years in prison on charges they obstructed justice by inventing a story that Stewart had an agreement to sell the stock when it fell to $60.

"If you believe Douglas Faneuil's testimony, then this trial is over," Schachter argued. "He proved beyond a reasonable doubt every count in the indictment."

Faneuil's testimony is part of an arrangement with prosecutors under which he will be charged with a misdemeanor and receive a still-unspecified sentence. Schachter argued that a safer route for the former broker's aide was silence.

"Why on earth would somebody make this up?" Schachter asked. "There were no subpoenas. He came in on his own."

The prosecutor trained much of his summation on the $60 stop-loss story, saying it was simply the quickest lie at hand to co-defendants who believed they were beyond the law.

"Martha Stewart probably thought she would never get caught," Schachter said, arguing that was the only way to explain Bacanovic's first impulse to explain the trade as part of a tax-reduction strategy when the sale was carried out at a profit.

"It was a terrible story because it made no sense," Schachter said. "It was the first thing that popped into his head."

Bacanovic lawyer Strassberg argued it's Faneuil's story that should be doubted.

"He had an extreme motivation to shape the truth, this from a person who time and time again embellishes and twists the facts," Strassberg said. "There's no support for these charges at all -- like a house of cards, it has no foundation."

Strassberg was short on refutation, long on character impeachment, describing Faneuil as someone comfortable with the techniques of artifice -- even when he was on the stand.

"He mimicked people," Strassberg said. "He acted out things. What does that tell you about the kind of person he is?"

The long interval between Stewart's sale and when Faneuil came forward with his story suggests fear of his own prosecution got the better of him.

"He's always looking to blame others. He won't accept responsibility for anything he does," Strassberg said.

Judge Miriam Goldman Cedarbaum and some jurors briefly nodded off before Strassberg ended the first part of his summation. It will conclude Tuesday morning.

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