Tangled Webs (18 page)

Authors: James B. Stewart

Tags: #History, #United States, #General, #Law, #Ethics & Professional Responsibility

BOOK: Tangled Webs

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Had Faneuil done something wrong while at Merrill Lynch? Seymour asked, after establishing his background and employment history.

“Yes.”

“What did you do?”

So here it was, practically the first question. Out of his peripheral vision he could see Stewart and Bacanovic. Of course, he’d known they’d be there, but the reality was jarring. He could feel their presence even though he avoided any eye contact. Then he spotted
Vanity Fair
correspondent Dominick Dunne scribbling notes. Dunne looked up and stared intently at Faneuil. Faneuil found Dunne’s presence strangely comforting. He took a deep breath and began to speak.

“I told one client what another client was doing and then lied about it to cover it up.”

At last he’d said it: he’d done something wrong, and he took responsibility for it. It wasn’t so hard, really. From then on, whenever he wasn’t making eye contact with Seymour or one of the defense lawyers questioning him, he looked at Dominick Dunne. It calmed his nerves and helped him focus. Seymour led him through the fateful events of December 27, leading to the moment that had set everything in motion, the phone call that morning with Bacanovic:

“And then we just started talking about the morning’s events and how crazy it was and suddenly Peter said, ‘Oh my God, get Martha on the phone.’ ”

And then the whole story emerged, one he’d told so many times before, but now under oath, in a courtroom, for all the world to hear. By the end of his first day of testimony they’d gotten to the point where Bacanovic had called Stewart’s office and left a message about ImClone. Faneuil said he’d been on the call, but didn’t remember what Bacanovic had said. And then court was adjourned. Faneuil had survived. He embraced his parents, and then hurried back to the hotel.

T
he next day Faneuil got the cross-examination on drug use that he’d expected the day before. The jury waited outside. “Mr. Faneuil, do you know–do you understand the term ‘drugs,’ ‘illegal drugs’?”

Faneuil conceded that prior to his cooperation agreement he’d smoked marijuana with friends about once a month, and had used Ecstasy, a popular amphetamine, on two or three occasions at nightclubs. Morvillo zeroed in on his admission that he’d smoked marijuana in Jamaica after entering into his agreement.

“When you used drugs in April, were you violating what the government requested that you do?”

“I absolutely did not believe I was violating my cooperation agreement by smoking marijuana in Jamaica.”

“You thought that by smoking marijuana in Jamaica it was perfectly all right?”

“No–yeah, I thought–I assumed that it was legal in Jamaica.”

“What was that impression based on?”

“I’m not familiar with Jamaican law. I would say it was based on the ubiquity of marijuana use in Jamaica.”

Faneuil was excused, leaving the lawyers to argue heatedly about the relevance of his drug use. Curiously, no one seemed to know the legal status of marijuana use in Jamaica. (Morvillo later reported correctly that it is illegal.) Seymour stressed that Faneuil, through his lawyers, volunteered the information, and that otherwise the government would have known nothing about it. Morvillo countered that he’d violated his agreement, which went to his credibility. In the end the judge agreed that defense lawyers could ask Faneuil about his drug use prior to entering into his agreement, but not about smoking marijuana in Jamaica.

When Faneuil returned to the stand, Seymour asked him to resume his narration: the call from Martha Stewart, his disclosure of the Waksal trading, her order to sell. He discussed his ensuing discussions with Bacanovic, the strange breakfast with Bacanovic at Dean & DeLuca, and then the convenient discovery of the work sheet with “@ $60” written on it. Faneuil testified he thought it was “fabricated,” which triggered a chorus of objections from defense lawyers. Finally Seymour got around to Faneuil’s decision to come forward with the truth and his dealings with his lawyers. This, more than any other testimony, would establish–or destroy–Faneuil’s credibility. He was, after all, an admitted liar. And because of the controversial “silver platter” reference that had already caused him such trouble, it was the aspect that made Faneuil most nervous.

“Did you meet with Mr. Gutman?”

“I did.”

“Did you tell him what happened on December 27?”

“I did. I told him the truth.”

“Did you tell him about your SEC interview?”

“I did.”

“What did he tell you to do?”

“He told me I had no choice but to come forward immediately and that I should go down to the SEC the next morning and correct my testimony.”

“What did you say to him when he gave you this advice?”

“Well, I was extremely upset. So, I said to him–I was crying, and I said to him, I can’t do it, I can’t go down there tomorrow, I just can’t even envision it. I said, I’m not saying no, I won’t, because in my heart I really knew it was the right thing to do. . . . So I said, just give me a few days to let this sink in and sort of face the decision.”

“Did there come a time when you spoke to Mr. Gutman again?”

“Yes.”

“When was that?”

“Before I got back to him, as I told him I would, he called me, I believe. I went to his office. . . . He said, I had a very interesting conversation with Dave Marcus–Dave Marcus being a Merrill Lynch lawyer. He said that Dave Marcus had said to him that I did a great job with my SEC testimony, and there was nothing more to add, and that he certainly hoped I didn’t do anything drastic. I said to Mr. Gutman, ‘Do lawyers really talk that way?’ He sort of chuckled, raised his shoulders. Then Mr. Gutman said, ‘But let me talk to you really about what Dave Marcus said in detail.’ He said, ‘I can’t tell you exactly what Mr. Marcus said, but what he said in so many words was the government had reached a deal–or Merrill Lynch had reached a deal with the government whereby Merrill Lynch would hand over the Waksals on a silver platter in exchange for looking the other way with regard to the Martha Stewart situation.”

“What did you say?”

“I said, ‘So, does that change your advice?’ He said yes.”

“What advice did he give you then?”

“He said, I think you should lie low. If Merrill Lynch asks you any more questions about what happened, you can continue to answer, but if the government ever speaks to you again, call me first.”

“Did you know whether in fact it was true that the government had cut some deal with Merrill Lynch about the Waksals and Martha Stewart?”

“I certainly didn’t believe there was a signed contract. It seemed a bit far-fetched to me. But I didn’t know how these things worked. I had no idea.”

So it was out. Faneuil took a deep breath. He’d used the words he’d remembered : “silver platter.” He’d told the truth. It was strangely exhilarating.

Seymour continued to explore Faneuil’s change of heart.

“After your SEC interview, did you talk to Peter Bacanovic?”

“Yes.”

“Can you tell us about your conversation?”

“Yes. After the interview, I believe it was in his office, he just asked me how it went.”

“What did you say?”

“I said they really didn’t focus on Martha Stewart very much, but I told them she called and asked for a quote and decided to sell. And he said, ‘Good’ again . . . I had many conversations with Peter over the course of the year before I came forward. It was always basically the same conversation. I would say it probably occurred five times. I really couldn’t say when exactly they happened, but it was spread out.”

“Could you tell us the substance of the conversation?”

“Yes. In that conversation, he reiterated what he had said previously: He has spoken to Martha, everyone is telling the same story, the $60 stop-loss story, that story is the truth, we are all on the same page. That was the extent of the conversation. There was one conversation in particular that was different. I was reluctant always to do so, but for some reason during this conversation, which I would say came late, not too soon before I came forward, in which out of frustration I just said to Peter: ‘Peter, I spoke to Martha on the phone–’ ”

Morvillo objected but was overruled. Faneuil continued:

“So out of frustration, I said, ‘But Peter, I know, I spoke to Martha, I know what happened. I know what I said and I know what she said.’ Peter just said, ‘Don’t even say that, just don’t even say that.’ And that was it.”

Faneuil explained his decision to come forward: “There came a point in time where I just couldn’t continue to lie, and I felt, of course, that not only had I lied to the SEC on two occasions but I felt the cover-up was part of my daily existence, and I just couldn’t take it anymore.”

Seymour showed Faneuil a copy of his plea agreement, which he acknowledged signing. “What are your obligations under that agreement?”

“First and foremost to tell the truth. Not to break the law. To attend all the meetings that are asked of me to attend, and be basically where the government wants me to be, and to plead guilty to the crime . . .”

“Mr. Faneuil, in the course of your cooperation with the government, did you tell the government about drug use that you had done?”

“Yes.”

“At the time were you being investigated at all for any drug use?”

“Not that I know of.”

Faneuil’s direct examination was over. As former Merrill Lynch analyst Henry Blodget, covering the trial for
Slate
, observed, Faneuil’s testimony

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.

In short, Faneuil was credible.

F
aneuil posed a serious threat to the defense’s strategy. If he was, in fact, telling the truth, then Bacanovic and Stewart had lied repeatedly, concocted a cover story, and then obstructed justice to maintain it.

So why might Faneuil be lying? The obvious defense strategy in dealing with anyone who has a cooperation agreement with the government is to suggest that the witness has made up the story the government wants to hear in order to strike a lenient plea bargain. Another is to suggest the witness is a congenital liar. By his own admission, Faneuil had lied (or at least withheld the truth) and he had entered into a plea agreement that spared him a felony conviction. Having done something wrong, he was trying to shift blame to his boss. He resented Stewart and wanted to blame her too. They were successful professionals and he was a young, nightclub-crawling drug user.

Still, the defense faced the problem that having a motive to make up a story and then lie on the witness stand isn’t the same as actually doing it. This was especially true for Faneuil, who had, after all, corrected his earlier lies and omissions and told the jury he “just couldn’t take it anymore.” And if he was making up a story to please the government, why wasn’t it more damning to Bacanovic and Stewart? Faneuil never testified that Bacanovic told him explicitly to lie. He never claimed that Stewart told him why she was selling her ImClone shares. Had he wanted to curry favor with the government, he presumably would have told them what they wanted to hear about the tax-loss selling and the silver platter. He did not.

David Apfel, another lawyer for Bacanovic, began his cross-examination. “Mr. Faneuil, let’s get a few things straight right away. First of all, on December 27, 2001, you spoke personally to Martha Stewart, is that correct?”

His tone was aggressive and hostile. He spoke with rapid-fire precision. When he addressed Faneuil as “sir,” there was a hint of a sneer.

“That’s correct.”

“The stock price that you gave her over the phone was below $60, isn’t that true, sir?”

“Most probably.”

“Most definitely, isn’t that true, sir? After you told Martha Stewart that the stock was trading below $60 a share, it was only then, sir, that she told you to sell, isn’t that true?”

“She told me to sell after I gave her the quote, yes.”

“When you first spoke to the government about the December 27, 2001, ImClone trades, you lied, isn’t that correct, sir?”

“That is correct.”

“You lied to cover up what you had done, isn’t that true, sir?”

“In part, I would say, yes.”

“When you next spoke to the government about the December 27, 2001, ImClone trades, you lied once again, isn’t that correct?”

“That is correct.”