Dispatches From The Martha Stewart Trial

The Star Witness Delivers

Chance of conviction
Wednesday, Feb. 4: 28 percent
Based on Douglas Faneuil’s credible, dramatic testimony—as well as his survival of the first two hours of cross-examination—Martha Stewart’s chances of conviction rise from 18 percent to 28 percent. Peter Bacanovic’s rise further.

Now we know why the defense has tried so hard to discredit Douglas Faneuil: Despite his glaring weaknesses (as the jury has now heard ad infinitum, he is an “admitted liar” and an “admitted criminal”), he is a superb witness. The events of Feb. 4, in fact, illustrated not only how effective an ostensibly vulnerable witness can be, but how easily an ostensibly slam-dunk cross-examination can go awry.

The day began with an exploration of Faneuil’s “drug use”—the same drug use that, last week, in the marble hallways outside the courtroom, had morphed into a drug “problem.” According to Faneuil, the “problem” amounted to taking ecstasy a few times and smoking pot once a month. The absurdity of grown men trying to imply that this practice had addled Faneuil’s perceptions and/or made him so terrified of being prosecuted for illegal drug use that he would say anything to pacify the government wasn’t lost on the judge. Had the jurors been present, it wouldn’t have been lost on them, either. When the drug discussion was (finally) over, the jury was summoned, and Karen Patton Seymour and Faneuil picked up where they had left off.

Faneuil: Call him “Sir” like you mean it

As the defense would later point out (endlessly), Faneuil’s testimony was obviously rehearsed. With a few exceptions, however, the rehearsal appeared mainly to instill in Faneuil the Zenlike calm necessary to weather two hours of agonizing cross-examination—agonizing not because it was damning but because it was annoying. Before then, however, came three hours of direct testimony, much of which amounted to a demonstration of the art of effective storytelling. Faneuil anchored his descriptions with vivid, specific details. He used language that was forceful and direct. He appeared sober, serious, and—without being pathetic about it—contrite. He was never defensive: His body language said, “I am sorry for what I did, but I am taking responsibility for it, and I am relieved that I no longer have anything to hide.” He considered his answers carefully and provided several that didn’t help the government.

On Dec. 31, 2001, Faneuil said, he was approached by Judy Monaghan, the Merrill administrator who testified earlier. Monaghan asked Faneuil “what was going on with these ImClone trades,” and he “took her through the morning’s events.” Then he called Peter Bacanovic and told him that Monaghan was asking questions. According to Faneuil, Bacanovic reacted violently:

He said, “The reason for Martha Stewart’s sale was tax-loss selling. It was tax-loss selling.” I tried to say something, but I couldn’t get a word in edgewise. He cut me off every time. He kept saying, “The reason for her sale was tax-loss selling!” He completely ignored me and wouldn’t let me speak. Then, finally, he finished and there was silence. “OK?” he said. “OK?” I said, “OK.” [Note: All italicized testimony is paraphrased]

Faneuil testified that his first interview with the SEC focused on Sam Waksal: Only “1 percent” of it, he said, was about Martha Stewart. He said he told the SEC that Martha Stewart called, asked for a quote on ImClone, and then decided to sell. He said he didn’t tell the SEC anything about Sam Waksal selling.

Why not? Karen Seymour asked.

“I suppose the short answer is that I was afraid,” Douglas Faneuil said.

Soon thereafter, Faneuil said, Stewart’s bookkeeper called and yelled that the ImClone trade totally screwed up Stewart’s tax-loss selling. I called Peter immediately. I said, “What is going on?” Again, he began screaming: The reason for the sale is that we came up with a stop-loss order agreement at $60. We had a stop-loss order at $60. Again, I couldn’t get a word in edgewise. At the end, he said, “OK? OK?” I said “OK.”  For some of the discussions with Bacanovic, Faneuil borrowed colleagues’ cell phones. Why? Seymour asked. Because I didn’t know whether Merrill’s phone lines were recorded, and I wasn’t comfortable having these discussions on a recorded line. When Peter Bacanovic returned from vacation, Faneuil said,

he took me out of office to Dean & Deluca, a café nearby. He sat me down and told me everything was going to be all right. He told me his history of working at Merrill, how he had worked for a while in a mailroom in Hollywood because he thought he wanted to be an agent, and then he decided to become a broker. He told me how after only seven years he had become one of the most successful brokers in the office, how he had never dreamed he would be so successful, and how everyone in his family was proud. Then he told me about his relationship with Martha Stewart. He said she was difficult and frustrating sometimes, but that they were extremely loyal to each other. Then I said, let’s talk about the 27th. I was there, Peter. I know what happened. He put his hand on my shoulder and said, with all due respect, you don’t.

Now, there are two ways of interpreting this story (and many that followed), even assuming that every word is true. First, one can view the events as Faneuil views them: Bacanovic recognized that Faneuil could destroy him, and, therefore, with increasing intensity, tried to schmooze, bully, and bribe Faneuil into keeping silent. Second: Bacanovic recognized that Faneuil believed, incorrectly, that they had done something wrong, and, therefore, with increasing intensity, tried to convince him that they hadn’t. Whichever way the jury views it, Faneuil’s take is clear: In the Dean & Deluca meeting, Faneuil said, Bacanovic also repeated the reason for Stewart’s sale. Faneuil didn’t recall, however, “which cover story it was,” the tax-loss selling story or the stop-loss order story.

Soon, Faneuil said, Bacanovic offered him a plane ticket to Argentina, which he didn’t accept. Then Bacanovic called Faneuil into his office and said, “I’ve spoken to Martha, I’ve met with her. Everyone’s telling the same story. It was a $60 stop-loss order. We’re all on the same page. And it’s the truth. It’s a true story.” Then Bacanovic showed Faneuil the allegedly altered worksheet, and said, “Look what I found. See? See?’

By 2:30 in the afternoon, after walking Faneuil through his decision to come forward and tell the truth—I felt that the cover-up had become part of my daily existence; I couldn’t take it anymore—Karen Seymour was done. Douglas Faneuil took a deep breath, and readied himself for the onslaught.

On paper, obviously, Faneuil screams for the pit-bull cross-examination approach. In reality, however, he comes across as a likable, sincere 28-year-old who made mistakes. As a result, by repeatedly addressing Faneuil as “Sir” in a tone that suggested that he really meant “Shithead,” Peter Bacanovic’s attorney David Apfel didn’t help himself. His question construction also seemed poorly tailored to the flesh-and-blood Faneuil. “Isn’t it a fact that …” Apfel often sneered, and then failed to establish a fact worthy of indignation. “So what you are telling us is that …” Apfel often scoffed, only to have Faneuil patiently recast the mischaracterization to make it accurate. “So you would admit that …” Apfel often stated, and then added an assertion that was untrue, previously testified to, or benign. Faneuil didn’t let Apfel put words in his mouth, and he didn’t let him twist prior testimony or make stupidly simplistic assertions. He also never got indignant or impatient himself, either of which would have destroyed him.

Apfel devoted a full hour to demonstrating how much “rehearsal” Faneuil had had, at one point asking if the preparation had included acting lessons (“Absolutely not,” Faneuil said, with the perfect amount of emphasis). Sometimes, such sarcasm is funny and effective. This time, it just made Apfel look like an asshole.