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NEW YORK (AP) The former top lawyer at Martha Stewart Living Omnimedia testified Wednesday that he told Stewart on Jan. 25, 2002, that authorities wanted to speak to her about the sale of her ImClone stock.
That was six days before Stewart altered a computer log of a message left by broker Peter Bacanovic on Dec. 27, 2001, the day she sold ImClone shares, according to previous testimony by her assistant Ann Armstrong. Stewart immediately told Armstrong to change the message back to its original wording, Armstrong testified last week.
The lawyer, Gregory R. Blatt, also testified Wednesday that in 2002, Stewart held more than 90 percent of the voting shares of stock in the media company that bears her name.
Prosecutors have argued Stewart was trying to protect her considerable wealth when she claimed publicly that year that her sale of ImClone stock had been proper.
Also Wednesday, the 2nd U.S. Circuit Court of Appeals in Manhattan said U.S. District Judge Miriam Goldman Cedarbaum erred in refusing the media access to individual questioning of potential jurors in the trial, which began last month.
Seventeen media organizations, including The Associated Press, had argued that high public interest should not close jury selection.
The appeals court said it knew its ruling was too late to make a difference in the Stewart trial. But it said the issues likely would arise in future trials and were too important to overlook.
On Tuesday, Cedarbaum decided to allow friends of star witness Douglas Faneuil to tell jurors what he confided to them just after Stewart dumped ImClone Systems stock.
The friends are expected to testify that Faneuil told them in early 2002 — long before he began cooperating with the government — that he had done something wrong and possibly that he had been pressured to do it.
At the same time, Faneuil was telling federal authorities that he simply gave Stewart a stock quote on Dec. 27, 2001, then followed her orders to sell all her 3,928 shares of ImClone.
Faneuil changed his story in the summer of 2002, claiming instead that Bacanovic ordered him to tip Stewart that day that ImClone founder Sam Waksal was selling his shares.
Faneuil told the same story earlier this month at Stewart and Bacanovic's trial. Testimony from his friends that he was worried long before he came forward would damage Bacanovic and Stewart's cases.
"The government is entitled to show," Cedarbaum ruled Tuesday, "that what he told his friends was consistent with what he decided to tell the government in the summer of 2002."
Testimony of Faneuil's friends could provide a boost to the government just as prosecutors are wrapping up their case. They told the judge they expect to rest by Thursday.
Securities fraud, carrying up to a 10-year prison term, is the most serious of the five counts against Stewart. The other four -- conspiracy, obstruction of justice and two counts of making false statements -- carry five years apiece. Bacanovic also faces five counts, all carrying potential five-year sentences. If convicted, both are likely to get far lighter penalties than the maximum under federal sentencing guidelines.
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