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Martha Stewart Trial: Prosecution Begins Closing Arguments

The prosecution began its closing arguments today in the trial of Westport’s Martha Stewart, telling the jury that Stewart knew going into a meeting with federal authorities in 2002 that she would lie about her sale of ImClone Systems stock.

“She would conceal from the FBI and the (Securities and Exchange Commission) the true reason for her sale,” said Assistant U.S. Attorney Michael Schachter. “Martha Stewart would lie.”

His summation took about three hours and ended with him urging the jury to use common sense in their deliberations. He said if they did, they would find the defendants guilty on all counts.

Schachter argued that Stewart and her co-defendant, broker Peter Bacanovic, hatched a cover story claiming that they had a prearranged agreement to sell ImClone shares when they fell to $60.

“Martha Stewart probably thought she would never get caught,” said Schachter.

But she “left behind a trail of evidence,” including an altered phone log, which combined with the testimony of brokerage assistant Douglas Faneuil, proves her guilt, he said.

If you believe Douglas Faneuil’s testimony, this trial is over,” said Schachter.

He argued that Faneuil is credible because he came forward on his own and admitted he had lied to law enforcers about “a powerful person.”

Faneuil lost his job and pleaded guilty to a crime that could put him in prison for a year. Given all that, “Why on earth would somebody make this up?” the prosecutor asked.

Last week, U.S. District Judge Miriam Goldman Cedarbaum tossed out the government’s most serious charge, that Stewart lied to investors in her own media empire, Martha Stewart Living Omnimedia, by saying her ImClone Systems sale was proper.

Before the closings began today, Cedarbaum informed the jury that the top count had been removed “for reasons of law that are not of your concern. It should not enter into your deliberations in any way.”

Cedarbaum’s action left prosecutors to try to persuade a jury of eight men and four women to convict Stewart of conspiracy, obstruction of justice and lying to investigators.

In his closing argument on behalf of Bacanovic, lawyer Richard Strassberg spent more than two hours attacking the credibility of Douglas Faneuil, Bacanovic’s former assistant who was the government’s star witness.

Faneuil initially told the government he handled Stewart’s stock sale after Stewart asked for a stock quote. But he changed his story in June 2002, saying Bacanovic ordered him to pass along the Waksal tip, then pressured him to lie.

Faneuil and the government have a cooperation agreement – clear motive for him to lie, Strassberg said, even alluding to Sunday night’s Academy Awards by suggesting Faneuil was acting on the stand.

Strassberg insisted Faneuil was starstruck by Stewart, and suggested it was he – not Bacanovic – who came up with the idea to tell Stewart about the Waksal selling.

“He lies by just twisting a few little facts, a few key facts,” Strassberg said. “But those facts are crucial.”

Strassberg stressed Bacanovic’s reputation as a trustworthy, meticulous broker at Merrill Lynch. He said Bacanovic never would have risked his career for the Stewart trade, which made him just $450 in commissions.

“It makes no sense, what it is they’re asking you to believe,” Strassberg said.

He also compared the government’s case with a house of cards.

“When you push on it, when you look at it closely, it collapses,” he said. “Because it has no substance. It has no foundation.”

Strassberg’s closing argument was to continue Tuesday morning, and Stewart lawyer Robert Morvillo was also to present his closing argument Tuesday. Jurors could begin deliberations as early as Wednesday.

Bacanovic faces charges that carry 25 years, but sentencing guidelines could mean a much shorter sentence if he is convicted on all counts.

The counts against Stewart carry up to 20 years in prison, although federal sentencing guidelines could result in a sentence of just a year or so.

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