O
n June 4, 2003, the grand jury indicted Stewart on eight counts of lying, obstruction, and conspiracy and one of securities fraud. She wasn’t charged with criminal insider trading, as Comey had decided, but the SEC filed a related civil suit that did. The grand jury indicted Peter Bacanovic for obstruction, perjury, and an additional count of making and using a false document. After entering a not guilty plea, Stewart resigned as chief executive and a director of Martha Stewart Omnimedia and assumed the title of “creative director.” She stepped down as a director of the New York Stock Exchange. She faced a maximum sentence of thirty years in prison and a fine of $2 million if convicted on all counts. “This criminal case is about lying–lying to the FBI, lying to the SEC and investors,” Comey told the horde of reporters gathered outside the courthouse. “That is conduct that will not be tolerated. Martha Stewart is being prosecuted not because of who she is, but what she did.”
THREE
“A Conspiracy of Dunces”
T
he trial of
United States of America v. Martha Stewart and Peter Bacanovic
began on January 27, 2004. Karen Seymour, the lead trial lawyer, dressed in a sober light gray suit and one strand of pearls, looked like she could have stepped from the pages of
Martha Stewart Living
.
Stewart herself had already managed to put her distinctive stamp on the courtroom. Her personal bodyguard was present each day, and had been granted an exemption so he could carry a gun into the courtroom. Stewart had special cushions made in navy fabric with contrasting stitching, embroidered with her monogram, which were placed each morning on the first three rows of benches reserved for her entourage. Several celebrities turned out to show their support by sitting through at least some of the trial, among them Bill Cosby and Rosie O’Donnell. Martha Stewart employees were assigned rotating trial duty so the Stewart benches were always full. Stewart had even baked and delivered a chocolate cake for FBI agents who worked in the building above the underground garage where she arrived each day. Lunch for Stewart, her lawyers, and supporters was catered by Russ & Daughters, a legendary delicatessen on the Lower East Side often featured in Stewart’s publications. Stewart’s hair was styled each day by celebrity hairdresser Eva Scrivo, who’d appeared on Stewart’s TV show.
Eight women and four men filed in to take their seats in the jury box. U.S. District Judge Miriam Cedarbaum had shrouded their selection in secrecy. Their names were unknown. Among them were a pharmacist, an art director, someone who worked at a law firm who traveled frequently for business (and whose husband worked at the
Wall Street Journal
), and someone whose best friend worked at Merrill Lynch, according to potential juror questionnaires. They were all employed and seemed well educated and relatively affluent. In short, they were a sophisticated jury that would be unlikely to hold Stewart’s success against her.
Seymour went straight to the point, without preliminaries: “This is a case about obstruction. It is about lying to federal agents. It is about perjury. It is about fabricating evidence, and it’s about cheating investors in the stock market.” After an overview of the expected testimony, she returned to the same theme: “Before I sit down I want to talk briefly about where I began, and that’s when I told you that this case is about obstruction and lying to federal agents. . . . In a sense this case is about something much bigger than that, bigger than those lies and bigger than any lie. Because this case is about the truth. The truth is what our nation’s investigators are entitled to hear. The truth is what our nation’s investigators need so that they can conduct their investigations fairly and so that justice may be done.”
Richard Strassberg, Bacanovic’s lead defense lawyer, made the opening statement for Bacanovic, who sat calmly on the other side of the courtroom from Stewart. Besides reiterating many of the facts not in dispute (that it was Faneuil, not Bacanovic, who fielded the calls from the Waksals and handled the trading that day), he took aim at the core of the government’s case: Faneuil’s credibility. “Mr. Faneuil is the one who lied to the government. He is an admitted liar, not Peter. . . . Mr. Faneuil is the one who got the deal. He has got the deal with the government to save himself, not Peter.
“What else does Mr. Faneuil say? Because he doesn’t stop there. What Mr. Faneuil says about Peter, the reason Peter has been dragged into this case, is that Doug Faneuil says, ‘I told Martha Stewart about the Waksals selling, but I did it because my boss told me to do it.’ That’s what he says. And you are going to assess that statement . . . if it makes any sense to you at all.
“The evidence is going to show you that it’s illogical, that it’s contradicted and that it makes no sense. First of all, you’re going to see it’s illogical because Mr. Bacanovic was available on 12/27. He was in Florida. He wasn’t across the world. If he wanted to tell Ms. Stewart about what another client was doing with their stock, sure, he would have done it himself. He would not have introduced his inexperienced, new assistant, ladies and gentlemen . . . he barely knew him. There is no way he would have put Mr. Faneuil in the middle of anything like that. It defies common sense. It didn’t happen. . . .
“The evidence is going to show you that Peter Bacanovic never asked Doug Faneuil to lie to anybody, to the SEC, to the government, to Merrill Lynch, to anybody; no evidence. . . . Doug Faneuil admits that. He will admit Peter never asked him to lie.
“What you’re going to see–and your common sense is going to tell you–is that Mr. Faneuil found himself caught in his own lies. And in an attempt to deflect–reduce his responsibility, minimize what he had done, he looked to blame his boss . . . the evidence is going to show you that he did it on his own. He did it to impress her [Stewart] because she was a celebrity.
“You are going to hear he was fixated with Ms. Stewart. You are going to hear how he talked to coworkers and his friends whenever he had limited contact with her. . . . He did it because he was trying to be the big man, because he was trying to impress her. Perhaps because he was trying to impress Peter. He did it on his own. He did it out of inexperience. He did it out of foolishness. But he did it, not Peter. Peter has been falsely accused.”
Morvillo, by contrast, barely mentioned Faneuil. “What is this case about? It starts and finishes with Martha Stewart. Not much more. Most of us know who Martha Stewart is, so I will not linger on her accomplishments. . . .
“Martha Stewart has devoted most of her life to improving the quality of life for others. And because she stressed the notion of making things as good and as perfect as possible, she has often been ridiculed and parodied.” The ImClone trading involved “far less than one percent of her net worth.”
Morvillo conceded that Stewart “may have actually made some mistakes” while answering questions from federal investigators. But “how is the government going to prove what was in her mind and what she recalled and what she didn’t recall on April 10 of 2002? How many meetings did she attend? How many projects did she initiate? How many television programs did she perform on? How many articles did she write? Is there no erosion to recollection over that period of time?
“As you can see, this really is a very unusual case and the charges are unusual. Again, I submit to you, the evidence will establish that Martha Stewart is totally innocent and is indeed a victim more than a defendant.”
D
ouglas Faneuil waited nervously for his turn on the witness stand. He’d been told not to read about the case, so what little he knew came from his lawyers. Still, he knew much of the government’s case rested on his shoulders, and he’d been told he’d be an early witness. The prosecutors asked Faneuil to come in for a one-day mock trial exercise.
One of the prosecutors played the role of Morvillo, cross-examining Faneuil and trying to poke holes in his story. Faneuil didn’t recognize him, but others from the team were there. Faneuil thought he was holding up pretty well.
“Have you used any drugs?” His lawyers had told Faneuil to expect this.
“Yes. I smoked pot.”
“Have you used any drugs since you signed your cooperation agreement?” In the agreement Faneuil had explicitly pledged to obey the law. But now he was taken aback. He’d gone on a vacation to Jamaica, and while there, someone had offered him a joint. He’d smoked it.
“I went to Jamaica and smoked pot,” he answered.
“You
what
? Are you kidding?”
There was an uproar in the room. He was starting to panic. “But it’s not illegal in Jamaica,” he protested. “At least, I don’t think it is. Everybody smokes pot in Jamaica.” The group took a break, and when they returned, the incident was dropped. Someone said they’d research the question of whether smoking pot in Jamaica was in fact illegal. Still, they told him he’d been “stupid” to do it.
But then the questions took another tack. “What would you say if anyone asked whether we’d pressured you to change your story?” Seymour asked.
Faneuil froze. After getting him to admit his guilt, challenging him on the tax-loss story, and the “silver platter” reference, that’s exactly what he thought they’d done. He said nothing.
“Because we didn’t try to pressure you,” Seymour continued. “If you try to insinuate that we did, the whole thing will fall apart.”
Faneuil was shocked and upset. Was he supposed to say he hadn’t been pressured? He was disillusioned that it had come to this. But he realized this wasn’t about his integrity. He decided to “play the fucking game,” Faneuil recalled. “I’d go to bat for them.” (Prosecutors stressed that they simply needed to test Faneuil’s memory and were not pressuring him to change his story.)
Faneuil was slated to appear on February 3. The night before, he and his father booked rooms at the City Club Hotel, compliments of one of the owners, who was a friend of Haskell’s. Faneuil was grateful for the generosity. That afternoon he had a last session with his lawyers, Powers and Pickholz. Afterward they arranged a car service and rode with him back to his hotel. “We’ve done all we can,” Powers said. “We’re confident in you. You’ve done a great job.” They had only one lingering concern, which was his account of the “silver platter” episode. “Listen, Doug,” Pickholz said gently. “The silver platter sounds far-fetched. No one is going to believe you if you tell that the way you say it happened. Maybe you don’t have to use the words ‘silver platter.’ Maybe you can soften the language.”
“Guys, it’s what happened. It’s what I remember. Maybe I’m wrong. Maybe I’m crazy. But this is what I remember.”
“We just hope you do the right thing,” Powers added.
Faneuil knew that the right thing–from their point of view–was to give it up, to forget the silver platter episode.
Faneuil got out of the car and went to his father’s room. He started to tell him what had just happened and burst into tears. “They’re telling me the only way people will believe me is if I lie. I can’t believe it.”
His father didn’t know how to advise him. “Listen, Doug. You do whatever you think is right. But if you lie on the witness stand tomorrow don’t tell me, don’t tell anyone–ever.”
F
BI agents picked Faneuil up the next morning and drove him to the courthouse. His parents were already there; they were planning to watch the trial but in the end were too nervous, and so sat in a room nearby. Rob Haskell didn’t attend. He had to work, and in any event the prosecutors didn’t seem to want him to be on hand. They’d never told Faneuil to lie about their relationship, but had suggested he might simply want to refer to Haskell as his “friend” if asked. Haskell promised to meet Faneuil at the hotel afterward. “Please don’t be late,” Faneuil pleaded.
When he arrived, Faneuil was taken to a room just off the courtroom. He was startled to see Judy Monaghan, the previous witness, sitting there. He hadn’t seen her or heard from her since he was fired. Their eyes met, and he thought she looked sympathetic. “How are you?” she asked.
“I’m fine.”
Seymour had told him that the jury wouldn’t be in the room when he walked in, and that he’d be asked some questions about drug use before beginning his testimony in the case. “The defense is trying to make a big deal out of it, but it’s not relevant,” she’d said.
Then an agent took Faneuil’s arm and led him to the door. “The government calls Douglas Faneuil, Your Honor,” Seymour intoned as the packed courtroom stiffened with eager anticipation. It was midafternoon, February 3. The door opened and Faneuil could see what looked like a huge space, almost like a cathedral. He’d never seen the courtroom where he’d be testifying. The agent pointed him toward the witness stand, and he walked forward. His suit looked too big on his slender frame; he’d lost weight from the stress. He looked younger than his twenty-eight years. Off to the side he saw the jury. What were they doing there?
He was sworn in. The clerk began, “State your full name and spell your last name slowly for the record.”
He didn’t feel ready. His knees were hitting the partition in front of him. His voice quavered and he was barely audible. The judge urged him to move closer to the microphone. “My knees are so long . . .” Faneuil explained, prompting laughter in the courtroom. It made him feel a little better. Seymour began her questioning and it was obvious that there’d been some change of plan.