- The Washington Times - Thursday, January 29, 2004

NEW YORK (AP) — A federal judge shut down the trial of Martha Stewart for the rest of the week yesterday, postponing the testimony of the government’s star witness after defense attorneys accused prosecutors of withholding vital information about his story.

The delay came after doubts were raised about what the former attorney for witness Douglas Faneuil recalled about the circumstances of the stock sale that triggered the case against the homemaking guru.

Mr. Faneuil is the former brokerage assistant at Merrill Lynch & Co. who sold Mrs. Stewart’s 3,928 shares of ImClone Systems stock in 2001 on her orders.

The government says Mrs. Stewart sold the shares because her stockbroker and co-defendant, Peter Bacanovic, sent a tip through Mr. Faneuil that ImClone Systems founder Sam Waksal was trying to dump his family’s shares.

But Mr. Faneuil’s former attorney, Jeremiah Gutman, gave a statement to the FBI last year that raised questions about whether Mr. Bacanovic or Mr. Waksal had ordered Mr. Faneuil to tip off Mrs. Stewart.

In court yesterday, defense attorneys suggested that Mr. Faneuil had told his lawyer he was not sure whether it was Mr. Bacanovic or Mr. Waksal. The government suggested it was Mr. Gutman, who is in his 80s, not Mr. Faneuil, who could not recall.

It was not clear why prosecutors turned over Mr. Gutman’s FBI statement late Wednesday night. Attorneys for Mrs. Stewart and Mr. Bacanovic said it should have been provided to them long ago.

“I do think the government should have turned over this information sooner,” U.S. District Judge Miriam Goldman Cedarbaum said.

Mr. Faneuil had been scheduled to testify yesterday, but Judge Cedarbaum postponed the testimony indefinitely. When prosecutors could not arrange for another witness to come in ahead of schedule in Mr. Faneuil’s place, she called the trial off for the week. It already had missed a day Wednesday because of a snowstorm.

Defense attorneys want at least a week to investigate Mr. Gutman’s FBI statement, as well as his discussions with Mr. Faneuil in January 2002.

Mr. Gutman, who no longer represents Mr. Faneuil, has declined to be interviewed by defense attorneys.

“The government knows what its obligations are,” Stewart attorney Robert Morvillo told the judge. “The government has failed to fulfill their obligation with respect to Mr. Faneuil.”

The government says it did not violate any trial rules, and that it was sufficient just to tell the defense that Mr. Gutman was part of their case — not what he specifically recalled.

“For Mr. Morvillo to claim there’s a Brady violation here is disingenuous,” prosecutor Karen Patton Seymour said, referring to a trial rule that requires prosecutors to share some information about witnesses with the defense.

Bacanovic lawyer Richard Strassberg first asked the judge to throw out the indictment against his client, then asked her to declare a mistrial. The judge denied both requests.

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