Revelations about witness derail Martha's trial. At the 11th hour, prosecutors release notes that raise questions about the credibility of broker's assistant Douglas Faneuil, their star witness against Stewart

By Gary Susman
Updated January 30, 2004 at 05:00 AM EST
Martha Stewart : Stephen Chernin/Getty Images/NewsCom

Is it a good thing for Martha Stewart? Her trial ground to a halt on Thursday after questions arose about the credibility of the government’s star witness against her — Douglas Faneuil, the former assistant to her broker, Peter Bacanovic. Lawyers for Stewart and Bacanovic complained in court that the prosecution had faxed the notes that raised doubts about Faneuil to them on Wednesday night, only hours before his scheduled testimony. According to the Associated Press, Judge Miriam Goldman Cedarbaum agreed to postpone Faneuil’s testimony for a week, but since the prosecutors had no other witnesses ready, the trial will be delayed until Monday.

Faneuil is the one who executed Stewart’s controversial sale of her nearly 4,000 shares of ImClone stock one day before word of government rejection of the biotech firm’s new cancer drug sent the share price plummeting. Stewart and Bacanovic have claimed that she had a standing order with the broker to sell if the price ever dipped below $60, but Faneuil — who had supported that account before changing his tune and pleading guilty to a misdemeanor — was expected to testify that Bacanovic had told him that ImClone founder Sam Waksal (a Stewart pal) was dumping his own shares and to pass the tip onto Stewart.

Wednesday’s notes, however, cast doubts on who, if anyone, tipped off Faneuil. The notes come from an FBI interview conducted with Faneuil’s former lawyer, Jeremiah Gutman, a year after his initial conversation with the broker’s assistant. According to the notes, as reprinted in the New York Daily News, the octogenarian lawyer ”cannot recall if Faneuil said he was instructed by Waksal, Bacanovic or someone else.” Prosecutors said it was Gutman’s memory that was faulty, not Faneuil’s, but Gutman told the Daily News on Thursday, ”I’m clear on it, but I’m not going to comment on it. When I come to court and the proper question is asked and the judge says I can answer, I’ll answer then.”

The revelations from the notes may not help Stewart prove she wasn’t tipped off, but they could help clear Bacanovic. On Thursday, his attorney moved for a mistrial, but the judge denied the motion.