- The Washington Times - Monday, February 9, 2004

NEW YORK (AP) — Martha Stewart’s secretary broke down in tears on the witness stand yesterday as she began to describe a phone conversation with the homemaking mogul on the day she sold her ImClone Systems stock.

The judge overseeing the trial ended the day’s proceedings 15 minutes early when secretary Ann Armstrong could not continue her testimony.

Miss Armstrong was answering questions from a prosecutor about relaying a message to Mrs. Stewart from her stockbroker on Dec. 27, 2001, that “ImClone is going to start trading downward.”

Miss Armstrong said she first talked with Mrs. Stewart — who was checking in during a plane refueling on the way to a Mexican vacation — about how each had spent the holiday season.

“I thanked her for the plum pudding she sent home,” Miss Armstrong said through sobs. U.S. District Judge Miriam Goldman Cedarbaum called a five-minute recess, then adjourned the trial for the day.

Mrs. Stewart is accused of lying about why she sold her ImClone shares later that day. The government says she received a tip that ImClone founder Sam Waksal, now serving a prison term, was selling his shares.

Earlier yesterday, the government’s star witness against Mrs. Stewart testified that he did not believe he was doing anything wrong when he passed her the tip that led her to sell ImClone stock.

Former brokerage aide Douglas Faneuil, who handled the stock sale, also testified that the domestic doyenne never encouraged him to lie.

Mr. Faneuil was asked by Stewart attorney Robert Morvillo whether he knew he was violating Merrill Lynch & Co. policy when he gave Mrs. Stewart the tip that Mr. Waksal was trying to dump his shares in the company.

But Mr. Faneuil said he thought only about the violation afterward, and he repeated that Mrs. Stewart’s broker at the time, Peter Bacanovic, had ordered him to give Mrs. Stewart the tip and encouraged him to lie about it later.

“I would say because Peter told me to do it, I did not think I was doing anything wrong,” Mr. Faneuil said.

Mrs. Stewart and Mr. Bacanovic are accused of repeatedly lying to investigators about why Mrs. Stewart sold her 3,928 shares of ImClone. Mrs. Stewart is also accused of deceiving investors in her own media company about the ImClone probe.

Mr. Faneuil has insisted that Mr. Bacanovic ordered him to tip Mrs. Stewart about Mr. Waksal. He says he never knew of any pre-existing arrangement between Mrs. Stewart and the broker to sell ImClone when it fell to $60, as they have asserted.

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