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Judge Postpones Stewart Witness Testimony

January 29, 2004

NEW YORK (AP) _ A federal judge Thursday postponed the testimony of the government’s star witness against Martha Stewart after defense attorneys accused prosecutors of withholding information about the circumstances of the stock sale at the heart of the case.

The judge postponed the testimony after Richard Strassberg, the lawyer for broker Peter Bacanovic, said doubts were raised by a 2002 FBI statement given by Jeremiah Gutman, the former lawyer of Douglas Faneuil, the star witness.

Gutman’s FBI statement said that Gutman was unsure whether Bacanovic or ImClone Systems founder Sam Waksal had asked Faneuil to tip Stewart that the Waksals were selling ImClone shares on Dec. 27, 2001, Strassberg said in Manhattan federal court.

Strassberg said he had just received the information Wednesday night, and that it was inconsistent with the government’s theory _ that Bacanovic ordered Faneuil to tip Stewart.

Strassberg also sought to have the charges against Bacanovic thrown out altogether, but the judge denied that request.

The discussion came after U.S. District Judge Miriam Goldman Cedarbaum ordered the government late Wednesday to turn over Gutman’s notes to lawyers for Stewart and Bacanovic.

Stewart and Bacanovic were hoping to use the notes to mine material to damage Faneuil’s credibility.

Also on Thursday, Luciano Moschetta, a Merrill compliance officer, testified for a second day about privacy rules the brokerage requires its financial workers to follow. Court was suspended Wednesday because of a snowstorm.

Moschetta’s testimony was part of the government’s effort to show that Bacanovic broke firm policy by passing information about one of his clients, Waksal, to Stewart.

The government claims Stewart sold 3,928 shares of ImClone on Dec. 27, 2001, because of a tip that the Waksal family was selling its shares. Stewart and Bacanovic say they had a prior plan to sell when the price fell to $60.

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