- The Washington Times - Wednesday, February 25, 2004

NEW YORK (AP) — Attorneys for Martha Stewart presented a defense of less than an hour yesterday, calling a single witness to raise questions about what the lifestyle icon was asked during her first interview with investigators.

Steven Pearl, a lawyer, testified about notes he took during the interview on Feb. 4, 2002 — a session in which the government says Mrs. Stewart told a series of lies about the day she sold ImClone Systems stock.

One accusation is that Mrs. Stewart falsely said she did not know whether there was a record that stockbroker Peter Bacanovic had left her a message on Dec. 27, 2001, the day she sold.

But Mr. Pearl’s scribbled notes show that Mrs. Stewart may have been responding instead to a question about what time Mr. Bacanovic had called her that day.

Under cross-examination by prosecutors, Mr. Pearl admitted that his notes were incomplete and there may have been a question about the message log he did not write down.

Referring to his notes and a memo he prepared after the interview, Mr. Pearl said: “Neither one is a verbatim transcript.”

There was no court reporter or tape recorder in the interview, and the government relied on the notes of an FBI agent to charge Mrs. Stewart with lying.

Attorneys for Mr. Bacanovic also rested their case yesterday. They had called five witnesses over three days.

The government says Mrs. Stewart sold her 3,928 ImClone shares because she was tipped that ImClone Chief Executive Officer Sam Waksal was frantically trying to sell his own. A negative report related to an ImClone cancer drug soon sent the stock tumbling.

Mrs. Stewart and Mr. Bacanovic say they had agreed earlier to sell the shares if ImClone’s price fell below $60. Prosecutors say that was a cover story.

U.S. District Judge Miriam Goldman Cedarbaum scheduled closing arguments in the trial for Monday and Tuesday and said the jury would begin deliberations Wednesday.

Jurors were excused for the week after prosecutors introduced a final piece of evidence — a portion of Mr. Bacanovic’s interview with the Securities and Exchange Commission.

On the audiotape, jurors heard Mr. Bacanovic say he never discussed the $60 arrangement with Heidi DeLuca, a Stewart business manager.

“I never get into that level of detail with Heidi,” Mr. Bacanovic says on the tape.

That appeared to refute testimony Ms. DeLuca gave earlier this week, in which she said Mr. Bacanovic discussed with her a plan to sell Mrs. Stewart’s ImClone shares when they fell to $61 or $60.

Prosecutors have suggested that Mr. Bacanovic had been talking about ImClone shares that Mrs. Stewart held in a company pension account — not her personal shares.

Prosecutors also called back to the stand their ink expert, Larry Stewart of the U.S. Secret Service, to testify about ink testing methods.

Mr. Stewart, no relation to the defendant, has said the defense used an unreliable machine to test the ink on a worksheet Mr. Bacanovic prepared. The sheet, for Mrs. Stewart’s portfolio, contains the notation “(at)60” next to a listing for her ImClone stock.

One of the charges in the case is that Mr. Bacanovic doctored the worksheet. The ink used for the “(at)60” mark is different from inks he used to make notes on the page.

Judge Cedarbaum has yet to rule on motions from both defendants urging her to dismiss the charges. She has indicated that it is unlikely she will throw out all charges.

The judge has focused some of her attention on whether she should dismiss the securities fraud charge against Mrs. Stewart.

That count, which carries more prison time than any other in the case, accuses Mrs. Stewart of deceiving investors in her own company, Martha Stewart Living Omnimedia, by saying in 2002 that she had sold ImClone stock because of the $60 agreement.

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