Judge delays key testimony in Martha Stewart trial

Prosecutors withheld information about former Merrill Lynch broker

? A federal judge placed a roadblock in the government’s case against Martha Stewart on Thursday, delaying the testimony of its star witness and chastising prosecutors for withholding information that might undermine the witness’ credibility.

The decision by U.S. District Judge Miriam Goldman Cedarbaum came moments before Douglas Faneuil, the former Merrill Lynch & Co. brokerage assistant who handled the stock sale at the center of the trial, was to take the stand.

While not crippling to the government, the ruling disrupts the prosecution and provides the defense with ammunition in its attempt to discredit the young assistant. Lead prosecutor Karen Patton Seymour told the judge the decision would hamper the government’s ability to “provide the foundation” for its case.

Faneuil is expected to testify that he gave Stewart a secret tip from her stockbroker that led the home decorating and style maven to sell nearly 4,000 shares of ImClone Systems stock just before it plummeted on a negative report about its most important drug.

But late Wednesday night, prosecutors provided defense lawyers with a document that raises doubts about whether the stockbroker ordered that the tip be passed on — and whether Faneuil himself recalls the episode clearly.

Lawyers for Stewart and the stockbroker, Peter Bacanovic, complained that they should have received the document weeks or months ago.

“I do think that the government should have turned over this information sooner,” Cedarbaum said. But she refused a request by Bacanovic’s attorney to declare a mistrial or dismiss charges against his client.

Jurors were not present for the judge’s remarks, and they were sent home until Monday. Cedarbaum delayed Faneuil’s testimony until Thursday to give the defense time to review the document.

The government says Bacanovic told Faneuil to tip Stewart on Dec. 27, 2001, that ImClone founder Sam Waksal was selling his shares. Waksal has admitted getting early word of the negative drug review.

Stewart and Bacanovic are accused of cooking up a false story about why Stewart sold the stock that day. They claim they had a pre-existing agreement to sell ImClone when it fell to $60 per share.

Martha Stewart and her daughter, Alexis, left, arrive at a federal courthouse in New York for her security fraud trial. The trial was postponed Thursday because new information was disclosed late Wednesday about Douglas Faneuil, a former brokerage assistant. He is a key component of the government's case.