Martha Stewart Changed Key Message, Assistant Says

Reuters ^ | 2-10-04 | By Paul Thomasch and Gail Appleson

[antivenom]

NEW YORK (Reuters) - Martha Stewart (news - web sites) changed an incriminating telephone message after she discovered she was under investigation over an insider stock tip, but then immediately asked her assistant to restore the original, the aide testified on Tuesday.

Federal prosecutors called Ann Armstrong to testify against her long time boss in an effort to show that the trendsetter was aware she had committed a crime in trying to cover up the insider stock tip from her former stockbroker Peter Bacanovic.

Armstrong said Stewart altered a pivotal Dec. 27, 2001 telephone message that initially read, "Peter Bacanovic thinks ImClone is going to start trading downward" -- a reference to the stock sale at the center of the trial.

The assistant said that on Jan. 31, 2002, after Stewart learned her ImClone trade was under investigation, she asked Armstrong to call up her computerized phone messages log.

Armstrong said that when she scrolled to the fateful Bacanovic message, Stewart sat down at her aide's computer.

"She instantly took the mouse and put the cursor at the end of the sentence and highlighted back to the end of Peter's name and then she started typing over that."

The new version then read "Peter Bacanovic re: ImClone," Armstrong said.

Armstrong said Stewart then had a change of heart and, "Instantly stood up ... and she told me to put it back to the way it was."

Prosecutors say the message shows that Bacanovic wanted to tip Stewart to secret information that ImClone's founder was dumping his shares. Stewart sold her nearly 4,000 shares in the biotech company the day she got Bacanovic's call.

ImClone shares fell sharply the next day when it announced health regulators had given the thumbs down to Erbitux, a cancer drug that was to have been the company's main product.

Stewart's lawyer Robert Morvillo tried to show that his client did not want to conceal Bacanovic's original message.

"Did she ever ask you to lie or cover up this incident," Morvillo asked the assistant.

"No," Armstrong answered.

Armstrong, who broke down in tears on Monday apparently overwrought about testifying against her employer of six years, was more composed as she gave her second day on testimony, which went to the heart of the case against Stewart and Bacanovic, who are accused of conspiring to cover up insider trading.

They maintain there was a pre-existing order to sell ImClone Systems Inc. shares if they fell below $60.

When asked about the telephone message during an interview in February 2002 with investigators, Stewart said she did not know whether the phone message from Bacanovic had been recorded in the computerized log.

[billorites]

"This is such small potatoes, considering what everyone else does."

I don't think most officers of public corporations trade on private information.

[latrans]

Enoug is enough. Who would not do what she did?

[Bluntpoint]

"Enoug is enough. Who would not do what she did?"

That is what most looters say in their defense after a riot.