The Martha Trial: With Pals Like This...

A jet-setting neighbor stuns the court by quoting Stewart as saying, Isn't it nice to have brokers who tell you those things!

By Jessi Hempel

I learned three things at the Martha Stewart trial on Feb. 19: First, courtroom artists can be their own toughest critics. Second, the U.S. Secret Service has a pen expert who can differentiate inks. And third, watch what you tell your best friend.

Let's start with the third first, since Mariana Pasternak, a longtime friend of the domestic doyenne, was the last witness to be called to the stand. Her final remarks before adjournment surely gave jurors something to think about when they went to bed last night.

Pasternak is Stewart's neighbor in Westport, Conn., and a friend of 20 years, she told the court. The two spoke daily to each other, and vacationed together in the Galapagos, Peru, Egypt, and Brazil in the years leading up to December, 2001. During the holidays that month, they were on their way via private plane to a beach resort in Mexico, when Pasternak testified she saw Stewart make a phone call during a refueling stop in Texas.


  Though she doesn't recall the content of that call, Pasternak, a prosecution witness, said Stewart "raised her voice." That would seem to corroborate the testimony of Douglas Faneuil, the assistant for Stewart's broker who told the jurors earlier in the trial that he had called Stewart on vacation to alert her that former ImClone (IMCL ) CEO Sam Waksal was selling his ImClone stock.

The most eye-opening testimony was yet to come, however. Pasternak recalled a conversation she had with Stewart in their hotel suite following a hike on December 30, 2001 -- three days after Stewart allegedly sold her ImClone stock. They discussed mutual friend Sam Waksal, Pasternak told the court. Stewart said Waksal said he "was selling or trying to sell his stock," Pasternak testified, and that "his daughter was selling or trying to sell her stock." That was enough to wake up the juror in the back row, who has a tendency to listen to lengthier testimony with his eyes closed.

Attorneys representing Peter Bacanovic, who is Stewart's co-defendant, objected, claiming that the information was hearsay. But U.S. District Judge Miriam Goldman Cedarbaum overruled, allowing the prosecution to proceed on the grounds that the testimony didn't directly concern Bacanovic, who was Stewart's broker.

Then came a bombshell which drew "oohs" and "aahs" from across the courtroom. Assistant prosecutor Michael Schacter asked Pasternak if she recalled anything else. Yes, she replied, there was one other statement Stewart made to her: "Isn't it nice to have brokers who tell you those things!"


  Baconovic's attorneys were back on their feet, vigorously objecting. Stewart's attorneys joined in. Even the prosecution seemed taken back. But the clock on the back wall pointed to 5 p.m., and Cedarbaum dismissed the jurors for the day. "I am keenly aware and will instruct the jurors tomorrow," she told the lawyers.

As for ink pens. the larger part of the day was devoted to the testimony of Larry Stewart, who is no relation to Martha but who is, in his own words, "the national expert on ink, of all things." He's the chief forensic scientist of the U.S. Secret Service, and he walked the jury and spectators through a lesson in how infrared light, ultraviolet light, and something called "a videospectral comparator" can reveal differences in inks.

He analyzed ink marks on a worksheet representing the summary of gains and losses in 36 stocks Stewart owned in late 2001 at Merrill Lynch, which is considered one of the most critical pieces of the government's evidence. Next to the entry marked "ImClone" on the sheet is the phrase "@ 60." Stewart has contended that she had standing orders with Bacanovic to sell her ImClone stock if it dropped under $60 a share.


  Larry Stewart testified that the notation was written with ink different from that used for all other notations on the sheet. That would buttress the prosecution's contention that the document may have been altered in what they alleged was a coverup by Martha Stewart. But under cross-examination, Stewart the pen man testified that he couldn't prove when the notation was made.

As for artists who provide TV stations with drawings from inside the courtroom, it has been a long three weeks -- and it's starting to show. As the day began, they set up their equipment in the first row, as usual. But when one of the female artists stepped outside, the other three started critiquing her sketch in progress.

"What's the heck is this?" asked one.

"You're better, O.K.?" replied a second. "I'm not saying I'm better, but look at this!"

Before they could carry their critique any further, Judge Cedarbaum sounded the gavel, and the jury filed in. The prosecution is expected to wrap up its case on Feb. 20. Then it will be the defense's turn when the trial resumes next week.

Hempel is covering the trial for Business Week

Edited by Douglas Harbrecht

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