Prosecution, defense close cases in Stewart stock fraud trial

NEW YORK -- The attorney for Martha Stewart's ex-broker suggested Tuesday that the broker would have turned against Stewart if he were actually guilty of the accusations against him.

Broker Peter Bacanovic would be "sitting on the government side" if he were guilty, attorney Richard Strassberg said, because the government's real target has been Stewart all along.

"He's here because he's not a liar," Strassberg said as he continued his closing argument. "And so his life is on the line here, ladies and gentlemen, before you."

Stewart's chief attorney was to make his closing argument later in the day. Jurors are expected to begin deciding the case today.

On Monday, prosecutors borrowed some of the homemaking icon's methodical approach in pulling together their case for the jury.

"Martha Stewart probably thought she would never get caught," prosecutor Michael Schachter said during closing arguments. But she "left behind a trail of evidence."

Schachter said that trail included contradictory statements, an altered phone log and the testimony of Bacanovic's former assistant, Douglas Faneuil.

Faneuil, the star prosecution witness, testified that at Bacanovic's request, he told Stewart that ImClone CEO Sam Waksal and his family were dumping the stock.

But Strassberg attacked Faneuil's credibility for more than two hours Monday, saying his cooperation deal with the government to avoid prosecution gave him "an incredible motive to lie."

Strassberg also stressed Bacanovic's reputation as a trustworthy, meticulous broker and said Bacanovic never would have risked his career for the Stewart trade, which earned him just $450 in commissions.

Taking such a risk "makes no sense," Strassberg said.

Stewart faces four federal counts and Bacanovic five related to the sale of about $225,000 worth of ImClone Systems stock on Dec. 27, 2001, the day before the stock tanked on news that the government declined to review the firm's cancer drug. While Stewart is not charged with insider trading, the government says she lied to investigators about the sale.

Schachter tried to dismantle the centerpiece of the pair's defense -- that they had struck a deal before Dec. 27 to sell Stewart's shares when ImClone stock dropped below $60. The prosecutor called the story "phony," "silly" and "simply an after-the-fact cover story."

Schachter listed inconsistencies -- mistakes, he called them -- in the stories Stewart and Bacanovic told federal investigators looking into the ImClone trade in early 2002.

For example, Bacanovic claimed they had the $60 conversation on Dec. 20, 2001. But Stewart placed the conversation with the Merrill Lynch & Co. broker in late October or early November.

And Schachter took jurors back to Jan. 31, 2002, four days before Stewart was first questioned about ImClone, when she allegedly tampered with a log of a message Bacanovic had left her the day she sold.

Stewart quickly ordered her assistant to restore the message to its original wording, according to the assistant's testimony. But the fact that she altered it at all is evidence of a guilty conscience, Schachter said.

After U.S. District Judge Miriam Goldman Cedarbaum dismissed the top count against Stewart, securities fraud, last week, jurors were left with charges of conspiracy, obstruction of justice and lying to investigators.

The remaining counts against Stewart carry up to 20 years in prison, although federal sentencing guidelines could mean a sentence of just a year or so if she is convicted on all counts. The charges against Bacanovic carry 25 years, but the guidelines would similarly reduce his sentence.