These are Elizabeth Koch's notes on the Martha Stewart trial.
Richard Strassberg, defense attorney for Peter Bacanovic, ends his closing arguments by stressing motive: Douglas Faneuil only comes forward after the ImClone buzz at Merrill Lynch has seeped into the press: Faneuil can no longer hide from the fact that he's the shining center of the entire ImClone scandal. He's the one who performed the Merrill Lynch trades that landed Sam Waksal in jail; it's his statement that informed the SEC, compelling them to investigate further. No surprise that he's suddenly scared out of his mind, Strassberg says, now that it's clear whatever deal the government supposedly made with Merrill Lynch has vanished. Or erupted. Now would be the time to come forward, before he finds himself lying in criminal court. But of course, Strassberg stresses, lying on the stand is exactly what Faneuil has been doing. He has to. If he doesn't stick to the story he and the SEC agreed to, the deal's off. The government will trash the bogus misdemeanor bargain; and Sir Faneuil will not only be tried for a felony but face a brand new perjury charge.
The jury seems genuinely focused, but a few press people sigh loudly and roll their eyes. I frankly don't blame them. Strassberg may be dead-on in terms of content, but keeping his voice below a hysterical pitch would get him farther.
Strangely, when Strassberg arrives at his heart-jerking conclusion—one that might warrant a little drama—his voice drops to a kinder, more gentle timbre. "It's frightening that you could be fighting for your life over a pronoun," he says, referring to the mis-transcribed February 13 SEC meeting, the only meeting the government bothered to tape, which substituted "We" for "I" in Peter's statement that "We told Martha" ImClone was trading downward. "It's understandable that someone made a mistake, but a mistake should never be used to charge someone with a criminal offense." The jury box gasps and becomes still, as if the jurors have had the collective wind knocked out of them. When the pause breaks, heads rush toward notebooks.
"There's only one time for Peter Bacanovic. That time is now. He's a victim, caught in the crossfire about the events of a phone call he wasn't privy to, caught in the crossfire of the government's attempt to make a case against Martha Stewart. He made a mistake (letting Faneuil handle Martha's trade), but was not willing to take a deal that would wrongly implicate his friend. He's lost his reputation, his career, everything he spent over nine years building, and now his life and liberty are also on the line.
"You are here to prevent overreaching and the twisting of facts. I trust you will do just that."
Stewart defense counsel Robert Morvillo begins with his usual clarifying analogy: "The government has accused Martha Stewart of participating in a Confederacy of Dunces!" Heads jerk and eyes widen. "If two smart, successful people were to sit down to concoct a story, wouldn't they make sure to match them up? Wouldn't they have made at least certain aspects of it cohere? Look at the gaping inconsistencies! They fall down on the very first element of the case!"
He goes through a litany of discrepancies that surround the $60 arrangement and ultimate sale of ImClone stock—when they made the agreement, where they made it, who else knew about it, and when they were told. "They couldn't even get straight who took down the order and executed the transaction! What kind of conspiracy is this? It's a Conspiracy of Dunces!" The jury looks somewhere between amused and stunned.
Before launching into the conspiracy charge, Morvillo mentions something prosecuting attorney Karen Seymour said in her opening arguments: that the Waksals were "trying to sell every last ImClone share they held. That was an inaccurate statement," Morvillo asserts. "Sam Waksal only held 2 percent of his over three million shares at Merrill Lynch. Do I think Seymour's a liar? No, of course not. She made a mistake. Just like Martha made a mistake when she thought she was speaking to Peter instead of Faneuil, jut like Heidi thought she wrote the note on November 7 instead of in October."
With that hit, he confronts conspiracy—the government's argument that Peter and Martha met after December 27 to get their stories straight. Morvillo asserts there was plenty of non-ImClone related activity in Martha's account from January 7 to April 10, the period in which the SEC interviews were conducted, that demanded broker and client conversation. In the beginning of 2002, Martha sold a chunk of her Martha Stewart Living Omnimedia stock for $45 million. "This is not $450 we're talking about," Morvillo says, referring to the amount of commission Bacanovic made off Stewart's December 27 ImClone dump. "There's not a shred of evidence that anything going on in any of those conversations was improper or conspiratorial." As for Faneuil's word...
"Faneuil testified that when Peter returned from his January 16 breakfast meeting with Martha Stewart, he said, 'We're on the same page,' about the $60 agreement. They weren't on the same page, they weren't even in the same boat! To believe the government's story, you'd have to believe these two people got together to conspire and couldn't get it right."
Brian Schimpfhauser, a Merrill Lynch market surveillance officer, accuses Peter of sending Martha a signal that something was going on with ImClone. But why, Morvillo asks, would Stewart assume Peter's "signal that Waksal was selling stock in his company" meant something [awful]? She believed the FDA would pass Erbitux anytime soon. There are all sorts of reasons Sam could have been selling—to diversify, for immediate cash, because the price is trading downward—"how would Martha know Sam would go insane...that he would be dumb enough to sell right before a black-out period [right before the FDA denied approval of his wonder drug], when he knew he'd have to file within ten days? And that his sale would be scrutinized?" At least half the jury is taking notes, the other half lean towards Morvillo. Even sleepy Juror 11 is writing in her notebook.
About the same Feb 4 meeting, Morvillo later asks, "If there was any doubt about what was talked about in that meeting, why didn't the government subpoena David Marcus (Merrill Lynch's general counsel), Steve Snyder (head of Merrill Lynch market surveillance), or Jill Slansky (FBI agent who took notes)? Why'd they call on Brian Schimpfhauser, the rookie whose job is to stare at the computer, the one with the haziest recollection? Why not call in experts about what happened in [Faneuil's] January 3 statement or [Bacanovic's] January 7 phone interview?" Several jury members cock their heads simultaneously, as if thinking, "Hey, that's right! Why the hell didn't they?"
Morvillo nails the government for mishandling Stewart's interviews in general. The FBI did not tape or transcribe them, the SEC did not tell her she was under oath, and the participating agents did not read her the SEC rules of compliance. First, Morvillo argues, "How can you say whether Martha dodged questions or responded in full when no one bothered to record the questions? Not recording the interviews allows the government to go after you any way they want."
Assistant U.S. Attorney Michael Schachter objects.