Martha Trial: Fretful Time

Douglas Faneuil and Martha Stewart
Attorney Andrew Cohen analyzes legal issues for CBS News and

We now know, officially and from a witness who swore under oath, that Martha Stewart can be difficult to work for and with. She yelled at Douglas Faneuil, the man whose testimony now may send her and her stockbroker, Peter Bacanovic, to jail. She complained about the music Merrill Lynch played for its telephone customers while they were placed on hold. And she hung up on Faneuil, Bacanovic's assistant, at least once, long before he improperly gave her a tip that enabled her to sell her Imclone shares on December 27, 2001.

That Stewart can be imperious at times should come as no surprise to anyone who has paid attention to her career over the years. In fact, it's probably the least surprising and interesting fact that has come out in this slow-moving case. As the stock fraud trial moves into its third week, however, the question isn't whether jurors will be willing to nominate Stewart for Miss Congeniality. The question is whether Faneuil's testimony about Stewart's mean streak will help convince jurors that she lied to the feds when they asked her about her role in the stock sale. Obviously, Faneuil's story doesn't help Stewart. But how much does it hurt?

The credibility mini-trial of Faneuil began this past week in federal court in Manhattan. The man whom prosecutors themselves described in opening statements as an "admitted criminal" is the government's star witness; the lynchpin of the case. And through nearly two days of cross examination he has stood his ground and stuck to the mainframe of his story:He helped Stewart and Bacanoic cover up a suspicious stock trade after he told Stewart-- at Bacanovic's request, he says-- to sell her Imclone stock because Imclone founder Sam Waksal and his family were selling theirs.

He told jurors that he thought he would be fired from his job if he didn't lie on behalf of Stewart and Bacanovic, whom prosecutors say concocted several different stories about why Stewart sold her shares when she did. First, prosecutors claim, Stewart and Bacanovic got Faneuil to go along with the story that Stewart sold her Imclone stock as part of a tax loss plan. When that didn't work, the feds contend, Faneuil was told by his boss that Bacanovic and Stewart had in place a plan to sell the domestic doyenne's Imclone shares when they hit the $60 mark. Both stories, Faneuil said under oath this week, were false.

If the jury considers it credible-- still a huge unknown at this early state of the case-- Faneuil's testimony helps prosecutors make their case against both defendants, but probably hurts Bacanovic more than it hurts Stewart. This is not an insider trading case, remember, so the contact between Faneuil and Stewart is legally relevant only to the extent that it helps support the government's theory that Stewart had a motive to lie to investigators when they questioned her. Against Bacanovic, however, Faneuil's story could resonate on several levels.

Faneuil says Bacanovic tried to buy him off with a vacation to Argentina and other special perks, including a late-arriving bonus. He claims Bacanovic pressured him to go along with the initial story about tax loss selling and the stop-loss plan. Faneuil told jurors that Bacanovic kept repeating those stories over and over "and made me feel I couldn't say anything." This fits into the government's theme that Faneuil was an unfortunate pawn of his boss; a young man who happened to have the bad luck to be covering for Bacanovic at work on December 27, 2001, the day that the Waksals-- and, by extension, Imclone-- imploded.

There is much ammunition available to the defense to use against Faneuil. He himself initially lied to investigators-- just like he now accuses Stewart and Bacanovic of doing-- until he made a deal with prosecutors in exchange for his testimony. Although Stewart and Bacanovic are charged with felonies, moreover, Fanueil is on the hook only for a misdemeanor and may receive a favorable sentencing recommendation (read: no jail time) if prosecutors are satisfied that he delivered the goods against the defendants. So far, however, the cross examination of Faneuil hasn't done nearly the damage it would have to do in order to ensure the acquittals of either Stewart or Bacanovic.

Only Bacanovic's lawyer so far has attempted to attack Faneuil's credibility. Stewart's lawyer, the Laguardia-like Robert Morvillo, gets his turn at bat on Monday. We now know from the cross-examination of Faneuil that the young broker-wannabe used drugs, both before this all came about and also after he made a deal with federal prosecutors to testify against the defendants. We now know, from Faneuil himself, that Bacanovic never explicitly told him to lie to anyone and that he considered his boss to be "the best boss he ever had" even though he claims that he was subject to "intimidation" by Bacanovic after the Stewart sale.. And we know that Faneuil lied not just to his former bosses at Merrill Lynch but also to regulators at the Securities and Exchange Commission.

We also know about the e-mails. Bacanovic's lawyers introduced two unflattering e-mails Faneuil wrote about Stewart after he had endured some contact with her. The e-mails are catty and inappropriate-- the types of correspondence you would hope that any young professional would have the sense not to write or send. The defense hopes that these e-mails will help convince jurors that Faneuil had it in for Stewart, that his testimony is some sort of revenge on her for the way she treated him on the telephone. But it is going to take a lot more than that to get these jurors rooting against Faneuil and for Stewart. So Morvillo prepares, and Faneuil waits, over what surely will be a sleepless weekend for both.