Martha Stewart Trial: Westporter vs Westporter

It was Westporter vs Westporter at Martha Stewart’s stock fraud trial today.

Stewart’s close friend and fellow Westporter Mariana Pasternak testified that just days after selling her ImClone Systems stock, Stewart said she knew that ImClone CEO Sam Waksal had been trying to dump his shares in the company.

The revelation by Pasternak, a friend of Stewart for more than 20 years, was perhaps the most damaging testimony yet against Stewart, who claims she sold the stock for an entirely different reason.

One reporter said Pasternak seemed relaxed, answering questions in her clipped accent and smiling frequently. Another said Stewart “glared” at Pasternak as she wound up her testimony.

A third wrote that “Stewart kept her eyes glued on Pasternak.”

Pasternak said Stewart told her about the Waksal sale on Dec. 30, 2001, just three days after Stewart sold her 3,928 shares of ImClone. The pair were on a terrace at a Mexican resort where they were vacationing.

“I remember Martha saying Sam was walking funny at the Christmas party, that he was selling or trying to sell his stock, that his daughter was selling or trying to sell her stock,’’ Pasternak testified.

She said Stewart added: “Isn’t it nice to have brokers who tell you those things?’‘

Pasternak, speaking in a hushed courtroom, said she remembered the evening because she and Stewart had been out hiking and were too tired to go down to dinner.

She said the conversation occurred before the end of December 2001. Prosecutors then showed a hotel bill for a guided hike that occurred on Dec. 30.

What Stewart knew about Waksal when she sold her stock goes to the heart of the U.S. government’s case that Stewart repeatedly lied to investigators in the ImClone probe.

Stewart told investigators she never recalled being tipped that Waksal was selling, and that she sold instead because she and her stockbroker had a pre-arranged agreement to sell Stewart’s ImClone shares when they fell below a certain price.

Pasternak, a Westport real estate agent for Nicholas H. Fingelly, said she and Stewart had been friends for more than 20 years, spoke by phone every day and had traveled together to Peru and the Galapagos Islands.

The pair were staying at Las Ventanas, a luxurious resort in Los Cabos, Mexico. Prosecutors displayed records showing the two ran up tens of thousands of dollars in bills for spa treatments, individual meals and other services.

Pasternak was flying on a private plane with Stewart on the day Stewart sold her stock, and testified Stewart had “a raised tone of voice” on the telephone at a refueling stop in Texas.

It was on a call from the refueling stop that Stewart sold her stock.

Pasternak, 50, is the estranged wife of Westport vascular surgeon Bart Pasternak, who also owned ImClone stock.

Why Pasternak turned on her longtime friend could only be speculated upon by those in the courtroom.

But one theory among spectators was that Pasternak may have turned state’s evidence when federal prosecutors hinted that she possibly might face some charges as well in the probe.

On Jan. 29, the New York Post reported that Pasternak “lives in a tony beach house in Westport” and had been battling her own financial and legal problems

The newspaper said its research into her background included a check of records at the Westport Town Clerk’s office.

Stewart is the godmother of two of Pasternak’s daughters, Monica, 20, and Lara, 17, and once took them on an exotic trip to the Galapagos Islands, the newspaper said.

“They’ve been close for a long, long time, so I don’t know how they’re going to handle this can of worms,” said one acquaintance quoted by the Post. 

Apart from the stress of having to testify against her pal, Pasternak is knee-deep in financial problems, according to records filed at the Westport Town Clerk’s office, the newspaper said.

Two federal tax liens have been filed against her property for a total of $380,000.

Another two liens show Pasternak hasn’t paid more than $12,000 in taxes to Westport. the Post said.

A local builder, Juno Filho, of Southern New England Renovations, is also suing Pasternak for an unpaid $83,000 for renovations, the files say.

One acquaintance said Pasternak has recently put her Westport property on the market for $1.7 million.

She bought the property for $908,000 just over three years ago, around the time she split with her husband, the Post said.

Pasternak’s Web site in fact lists a home for sale described as a “tony Westport beach house” with a price of $1.7 million.

It describes it this way: “Direct Waterfront. Beachfront property on Old Mill Pond. With waterviews from every room. Recent renovation – great amenities. A water lovers dream come true! Offered at $1,700,000.”

Pasternak’s Web site cites her wide experience in the area as well as expertise in foreign languages: “conversational skills in many foreign languages; French, Romanian, Spanish, Portuguese, and Italian.”

“Mariana is a mercurial type of person. She’s demanding and she looks after herself first,” one acquaintance said.

Sources told The Post last year that Stewart stepped in to pay tens of thousands of dollars of legal bills for Pasternak just before she began speaking with the government in 2002 about Stewart’s ImClone sale.

The Wall Street Journal reported in August 2002 that Pasternak’s ex-husband sold 10,000 shares of ImClone stock shortly before the ImClone news about the FDA’s decision was disclosed.

It quoted his attorney, Craig Raabe, as saying Bart Pasternak had been interviewed by federal and congressional investigators examining the matter about the sale.

Raabe said his client did not have any information about the FDA prior to the sale. “He made his own investment decision,” Raabe said, according to the newspaper.

“There was a declining price and greatly increasing volume. Most investors would think that’s a potential need to hedge.”

Earlier today, both the prosecution and the defense suffered setbacks.

A federal judge blocked the government from showing jurors Stewart haggling over reimbursements from her company for haircuts, coffee and other minor expenses.

Prosecutors wanted to raise the issue to head off the assertion by Stewart’s lawyer that she would not have focused closely on her sale of ImClone Systems stock.

That sale netted Stewart less than $250,000. She was once worth $1 billion.

Outside the jury’s presence, U.S. District Judge Miriam Goldman Cedarbaum heard testimony from James Follo, the chief financial officer of Stewart’s company, Martha Stewart Living Omnimedia.

Follo said he and Stewart had disagreed over whether she should be reimbursed for such expenses as being driven to shop for antiques and having her hair done.

“I’m relatively sure there were items in the $200 range that were at issue,” Follo said.

He said Stewart also had submitted claims for reimbursement for coffee and snacks.

But Cedarbaum said she would not allow such testimony before the jury because “there are too many things about it that lead down other roads.”

“I think it’s an elephant bringing forth a mouse,” she said.

The judge also blocked Stewart’s lawyer, Robert Morvillo, from arguing to jurors that the ImClone sale was “too small for Ms. Stewart to focus on.”

After Cedarbaum’s rulings, the trial resumed with the prosection calling to the stand Lawrence Stewart, an expert in ink analysis. The witness is not related to Martha Stewart.

Lawrence Stewart was asked to comment on a spread sheet, which the defense claims bolsters their claim that Stewart and her co-defendant, Peter Bacanovic, had a pre-existing agreement to sell her ImClone stock if it fell under $60 per share.

He said that a notation, “@60,” was made with different ink than all the other notations made on the piece of paper. The government alleges that Bacanovic altered the spread sheet.

On Wednesday, the judge said she would allow Morvillo to argue for dismissal of the most serious count against Stewart, securities fraud, before the trial goes to the jury.

The hearing could be Friday, after the government rests its case against Stewart.

The securities fraud count accuses Stewart of trying to prop up the value of Martha Stewart Living Omnimedia by lying to investors about why she dumped ImClone Systems stock in December 2001.

The charge carries a maximum prison sentence of 10 years. The four other counts against Stewart carry five years each. Federal guidelines would dramatically reduce the sentence on any charge if Stewart were convicted.