What's the Price? Sixty Twice!

Former lawyer lays an egg; jury takes bath in ink; Heidi preempts offensive drive

Elizabeth Koch | February 23, 2004

These are Elizabeth Koch's notes on the Martha Stewart trial.

The courtroom this morning anxiously awaits Judge Cedarbaum's decision whether or not to toss the charges filed against Martha Stewart and Peter Bacanovic. Out of the five counts against Martha Stewart—conspiracy, two counts of false statements, obstruction of justice, and securities fraud—she seems most ambivalent about the last. Prosecuting attorney Karen Seymour, eager to safeguard the conspiracy charges, holds Stewart's SEC testimony as undeniable proof of wrongdoing:

"On February 4, 2001, Ms. Stewart said that her managing accountant, Heidi Deluca, and her broker, Peter Bacanovic, would back up her $60 agreement story. THEN," Seymour aggressively recounts her theory, "she immediately recanted her assertion that Peter would concur, because she realized it contradicted what she'd just confirmed—not having spoken to Peter about ImClone in January." Of course that's Seymour's interpretation: when Heidi Deluca testifies later today, we'll see another.

Both Michael Strassberg (Bac's attorney) and Robert Morvillo (Stewart's attorney) insist that the government has yet to come up with independent proof that the defendants spoke on Jan 7, 2001, as prosecution contends. As Morvillo puts it, "Just because Stewart and Bacanovic said the same thing about the $60 agreement is not sufficient evidence of conspiracy."

An hour later, Cedarbaum puts a stop to the arguments: "I will reserve decision on all these matters." For when? The longer she puts off her verdict, the more time and money we waste listening to testimonies that could be rendered moot.

Witness: Jeremiah Gutman, Douglas Faneuil's attorney from January '02 to March '03

Gutman's fifteen minutes were more like five. He'd refused to meet with defense prior to testifying, so Strassberg wasn't sure what he'd get from the witness. It showed. Most of Gutman's testimony confirmed rather than contradicted Faneuil's statement, off by mere degrees.

Strassberg asks, "Did you ever tell Douglas Faneuil that, according to Merrill Lynch's in-house attorney, David Marcus, the brokerage firm had made a deal with the government: As long as they hand over Waksal's head on a silver platter, the government would ignore any Stewart wrongdoings?"

"Not quite," Gutman corrects. "I told him that the deal involved getting Merrill Lynch employees off the hook. Not Martha." Either way, Faneuil thought there was an arrangement, and therefore was persuaded to keep his mouth shut for a time—precisely the story he testified to weeks ago. But here's where degrees matter: Faneuil remembers the bargain not in terms of "Merrill Lynch employees" but in terms of its affect on Martha; considering who gave her the tip, "Martha" quickly translates into himself. This distinction seems inconsequential until we review the defense's main gripe against Faneuil—that he's a self-serving liar who'd do or say anything to save his own butt, even if it means pleading guilty to something he's innocent of, like, say, accepting bribes from Bacanovic in exchange for keeping quiet. Bribes the defense proved did not exist. Sure, why not accept a misdemeanor slap when you're looking down the felony barrel?

Nevertheless, Gutman's testimony is not going as planned; Strassberg's agitation is mounting. "Mr. Gutman, did you tell Faneuil in March '02 to go forward and [simultaneously] not lie but also stick to your story [about the $60 sell agreement]?" he asks hopefully.

"I told him to not lie but that if he came up with a different story, he'd be sticking his neck out. I recommended he get independent council to accompany him [to his SEC confession]," Gutman says. Strassberg paces, rakes his fingers through his hair, but doesn't interrupt his witness. "Faneuil got upset, said he was afraid to go forward, that he was afraid of them all, that [everyone at Merrill Lynch] was merciless and amoral. He cried and kept repeating he was afraid." That does it. Defense ushers Gutman off the stand, before he could do any more damage. Too late: the jury will come away thinking that Faneuil was more afraid of Merrill Lynch's wrath than either the government or jailtime, a belief that flies in the face of the defense's whole argument.

Witness: Dr. Albert Lyter, forensics chemist, self-employed at Federal Forensics Associates consulting firm

Bacanovic attorney David Apfel spends over ten minutes extracting credentials from Dr. Lyter, a necessary move considering the government's ink expert, Larry Stewart, dubbed himself "the national ink expert." Lyter may not be as engaging or slick as Stewart, but he also appears less biased: whereas Stewart works for the secret service, a government agency well-known for its shady dealings, Lyter is an independent contractor. But no hack, as prosecution would have it. Prior to opening his own lab in'82, Dr. Lyter worked for Alcohol, Tobacco, Firearms and regularly examined ink samples for federal, state, and local agencies. He left ATF when the secret service opened an internal lab and soaked up the bulk of ATF's clients.

Oh, and national ink expert Larry Stewart was Lyter's intern.

Lyter testifies that unlike Larry Stewart, he labeled all the marks on the page as "entries" and tested each and every one of them. Using a method called densitometry, Lyter concluded that at least three pens were used on Bacanovic's document: One for "@60 and the dash after ImClone; one for the circle around ImClone and the question mark after Apple computers; and at least one more for the remaining circles and check marks."