Corporate Scandals

Armstrong Agonistes

Secretary: Martha changed the past; jurors spared lecture on insider trading

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

Ann Armstrong continues to summarize the events of Dec 27. She says although she immediately relayed Peter's message re. ImClone to Martha, it was only after they had attended to numerous other matters that Martha asked to be put through to Peter's office. Ann doesn't know or doesn't remember who answered at Merrill Lynch—she got off the phone once Martha was connected.

Schachter then jumps to Martha's whereabouts on Jan 7, when and where Martha met Peter alone in January, when and where Martha met with her Martha Stewart Living lawyers. The judge seems distracted—she's silent for long stretches while Schachter paces and waits to hear whether she'll allow various calendars and e-mails into evidence. The jury's trying to stay focused, but it's hard to see any real relevance in Schachter's line of questioning.

Finally he asks about Jan 31, when Martha changed the phone log on Ann's computer from "Peter Bacanovic thinks ImClobe will start trading downward" to "Peter Bacanovic re: ImClone."

"I was startled. Martha had never sat at my computer before or changed any records," Ann offers when prompted. "I was standing behind her at the desk. Then she instantly stood up and said, 'Put it back. Put it back to the way it was.'" Ann asked a staff worker to help her recover the Jan 4 message log.

On cross, Morvillo asks, "Did Martha ever ask you to conceal or lie about the events of Jan 31? Did she ask you to cover up this event when she learned the government was going to question you?" No and no. Dismissed.

During break, once the jury is dismissed, the judge discusses whether a government witness from the SEC should be allowed to bring up the concept of insider trading. "I don't want to confuse the jury with something the defendant is not charged with."

"But your honor, the prosecution accuses Martha of benefiting from a 'secret tip,' thereby muddling the charges."

"I agree with you, Mr. Mrovillo, that this is not the most artfully drawn document."

Both teams debate possible lines of questioning, Morvillo assuming prosecution will try to prove that Martha acted as if she thought she was guilty of insider trading. "I need to bring up insider trading to prove that Martha was not fearful of such a charge because not only did she not believe she was breaking the law, but she was in reality not breaking the law."

The SEC has charged Martha with insider trading in civil court.

Kevin Barrows, a computer consultant, takes the stand for a minute. He says he "found an e-mail in Martha's hard drive sent from Martha to Jean Pagozzi on Jan 13." I assume there will be more on this later.

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