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Martha Called ImClone On Sale Day

Martha Stewart called ImClone Systems headquarters and demanded to talk to founder Sam Waksal to find out "what was going on" with Imclone's falling share price on the day she dumped her stock in the company, a former ImClone secretary testified Monday.

Emily Perret, a former secretary to the now-jailed Waksal, said Stewart was "very hurried and harsh and direct" in the call on Dec. 27, 2001.

Perret said she answered that she did not know why the stock was falling and would leave a message for Waksal to call Stewart back.

The government says the call happened just after Stewart sold 3,928 shares of ImClone stock — the sale that triggered the investigation that now has Stewart on trial for obstruction of justice and securities fraud.

Stewart and her co-defendant, ex-stockbroker Peter Bacanovic, are accused of concocting a false story that they had a pre-existing agreement to sell her stable of shares of ImClone if the stock fell below $60.

Prosecutors say Bacanovic actually told his assistant, Douglas Faneuil, to pass a tip to Stewart that the Waksal family was trying to sell its shares.

Waksal has admitted he had advance knowledge of a negative government report about an ImClone cancer drug, not released publicly until Dec. 28,that sent ImClone shares into a sharp decline.

On cross-examination, Perret was asked by Stewart's attorney whether the harsh tone was any different from the way Stewart usually sounded when she called to speak to Waksal.

"No, most of the time it was the same," Perret said. She also said that Stewart did not use words like "urgent" or "important" in leaving the message.

The government also put into evidence Perret's computerized log of Stewart's call that day: "Martha Stewart something is going on with ImClone and she wants to know what."

The defense has pointed out that Stewart's shares were just a small fraction of the millions of ImClone shares that changed hands that day, and that Stewart's call to Waksal was a reasonable thing for a savvy investor to do.

In court Monday, Stewart wore a bright orange jacket and black pants — a change from the dark browns and other muted colors she has favored since the trial began. Rosie O'Donnell came to court to watch the afternoon session, sitting in the first row behind Stewart.

Another witness testified Monday that Bacanovic initially told investigators that he personally spoke to Stewart on the day she executed the stock sale.

Brian Schimpfhauser, a Merrill Lynch & Co. compliance officer, said Bacanovic made the assertion in a Jan. 7, 2002, interview with the Securities and Exchange Commission and Merrill officials.

The government contends Bacanovic was lying in the interview — and that on the day of the stock sale, he actually instructed his assistant to tell Stewart that the Waksal family was selling its shares.

Schimpfhauser's account is backed up by notes he took during the meeting. But he admitted on cross-examination that his memory of the interview had grown "hazier" in the two years since it occurred.

The judge in the case ruled Monday that Faneuil, the government's star witness, will be allowed to testify beginning Tuesday afternoon.

A former assistant to Stewart's broker, Faneuil is expected to tell the jury that his boss and Stewart sold Stewart's shares in Imclone Systems after an illegal tip.

The decision by U.S. District Judge Miriam Goldman Cedarbaum was a boost for prosecutors because Faneuil's testimony — which had been put off until later this week — is the most critical piece of their case.

The judge did not elaborate on the ruling.

"Faneuil is an enormous part of the prosecution's case. If his story seems credible to jurors, it paves the way for the government to sell the rest of the circumstantial case to the jury. And if Fanueil comes off poorly, it opens the door for the defense to convince jurors that the best evidence the government had to offer simply wasn't good enough," says Legal Analyst Andrew Cohen.

"After he testifies for the government, remember, he has to face two withering cross-examinations, one from Stewart's lawyers and one from the attorneys for Bacanovic so Faneuil will be in for an awful time of it even if he utilmately succeeds in convincing jurors that the defendants were up to no good," says Cohen.

Prosecutors were forced to reconfigure their case after the judge postponed the testimony of Faneuil.

He had been set to testify last Thursday. But late Wednesday night, the government turned over to defense lawyers documents that could damage the credibility of Faneuil's testimony.

Defense lawyers argued they should have received the material long ago, and Cedarbaum said prosecutors had been too slow in turning it over.

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