The assistant to Westport’s Martha Stewart testified today her boss sat down at her computer and altered a record concerning a message left by Stewart’s stockbroker about ImClone Systems stock.
Stewart immediately stood up and and then ordered the message restored to its original wording, Ann Armstrong said.
The original message read: “Peter Bacanovic thinks ImClone is going to start trading downward.”
It reflected a call by Bacanovic on Dec. 27, 2001, the day Stewart sold her 3,928 shares in the company – and the day before the company announced a negative decision from government regulators about an ImClone cancer drug.
Armstrong testified that Stewart saw the message on Jan. 31, 2002, and replaced it with the words: “Peter Bacanovic re imclone.”
“She instantly stood up, still standing at my desk, and told me to put it back to the way it was,” the assistant testified at Stewart’s stock-fraud trial in Manhattan federal court.
Armstrong told jurors she was “startled” by Stewart’s conduct, and that Stewart had never before altered a message in the log, which Armstrong maintains at Martha Stewart Living Omnimedia, Stewart’s media company.
The government alleges Stewart was tipped by Bacanovic that the family of ImClone founder Sam Waksal was trying to sell his shares on Dec. 27. She is charged with obstruction of justice and securities fraud, among other counts.
Stewart and the broker say they had a pre-existing deal to sell ImClone when it fell to $60 a share.
Prosecutors walked Armstrong through her memory of January and early February 2002 in hopes of convincing jurors Stewart was worried about the circumstances of her sale of ImClone.
They introduced a calendar entry showing Bacanovic scheduled a breakfast with Stewart on Jan. 16, 2002, about three weeks after the stock sale.
Stewart had met with or spoken to her lawyers on each of the three days before she changed the log, Armstrong said. Four days later, on Feb. 4, Stewart met with government investigators for the first time in the ImClone probe.
According to a federal indictment, Stewart claimed in that interview with investigators that she did not know whether Bacanovic’s message from Dec. 27 had been recorded in Armstrong’s message log.
The altered message log represents one of the most critical pieces of evidence in the government’s case against Stewart.
Another is a worksheet that prosecutors say Bacanovic doctored after the stock sale to make it appear he and Stewart had previously discussed a plan to sell ImClone when it hit $60 per share.
Armstrong shut her computer down for the day, but retrieved the message’s original wording in the days that followed. She printed a copy of the original wording and saved it in a manila envelope.
Under questioning from Stewart lawyer Robert Morvillo, who was trying to limit damage from the testimony, Armstrong said Stewart called her the night of Jan. 31 and asked her to keep trying to restore the original wording.
“Did she ever tell you not to try to restore it?” Morvillo asked.
“No,” Armstrong answered.
At another point, Morvillo asked, “Did she ever ask you to lie or cover up this incident?”
“No,” Armstrong replied.
On Monday, Armstrong broke down in tears as she recalled speaking to Stewart on Dec. 27, when she gave her the message from Bacanovic. Armstrong maintained her composure on the witness stand Tuesday.
A Securities and Exchange Commission investigator, Helene Glotzer, was to testify later today about Stewart’s initial interview.
