Martha Stewart Will Not Testify at Trial

Martha Stewart (search) will not take the stand in her own defense, her lawyer said Tuesday, gambling that jurors will not need her testimony to acquit the homemaking icon of lying about a stock sale.

Lawyer Robert Morvillo said Stewart's defense team would call no more than two witnesses — a former lawyer who represented Stewart when she first met with government investigators and, if the judge allows it, a memory expert.

In either case, the Stewart defense is expected to start and end its case Wednesday. Closing arguments could begin as early as Thursday, although the judge said she might delay them until next week.

Morvillo made his announcement after jurors were excused from the 16th day of testimony at the trial. Stewart and broker Peter Bacanovic (search) are accused of lying about why Stewart sold ImClone Systems (IMCL) stock on Dec. 27, 2001.

Stewart and Bacanovic say they had earlier arranged to sell her shares when the price fell to $60. But the government claims Stewart was tipped that ImClone founder Sam Waksal (search) was frantically trying to sell his shares that day.

Rather than asking jurors to decide between the government's version of the story and Stewart's, Morvillo will simply argue prosecutors have failed to prove their case beyond a reasonable doubt.

Legal experts say putting Stewart on the stand would have raised a host of concerns for her defense team, including having her explain inconsistencies in her statements and exposing her to risky cross-examination by the government.

Stewart and Bacanovic have told investigators slightly different versions of what happened after the stock sale, although they both maintain the central element — that they had a plan to sell the stock at $60 a share.

Bacanovic's lawyers called just five witnesses, and expect to rest their case Wednesday morning. Lawyers for the broker decided he would not take the stand because "the government hasn't made its case," spokesman Lou Colasuonno said. "It's a circumstantial case, with a lot of inference."

The star witness for the government was Douglas Faneuil (search), a young Merrill Lynch assistant who claims he passed the tip about Waksal's selling from Bacanovic to Stewart.

The day after Stewart sold, ImClone announced the government had declined to review its application for an experimental cancer drug. The stock declined sharply the next trading day.

In front of the jury Tuesday, a business manager for Stewart testified that Stewart billed her company for a luxurious vacation she took just after selling her ImClone stock in 2001.

Heidi DeLuca (search), who handles finances for Martha Stewart Living Omnimedia (MSO) and for Stewart personally, testified she was instructed to submit the $17,000 vacation at a lush resort in Mexico for reimbursement as a business expense.

Stewart is not charged with any crime in connection with her expense practices. DeLuca did not say whether the company approved the reimbursement for Stewart's vacation.

Prosecutors aggressively attacked the credibility of DeLuca, who helped the defense Monday when she said Stewart's broker had mentioned a desire to unload Stewart's ImClone shares at $60 or $61.

DeLuca placed the conversation in November 2001, about seven weeks before Stewart sold 3,928 Imclone shares.

Prosecutor Michael Schachter tried to suggest that DeLuca's conversation with Bacanovic had actually taken place in October and that the $60 or $61 instead referred to shares Stewart held in a pension account.

Schachter showed her a document dated Oct. 24, 2001, on which she had written an ImClone stock quote — $61.52 — while she was on the phone with Bacanovic.

DeLuca insisted that her memory was clear and that there had been more than one conversation.

On Monday, DeLuca testified: "He told me he felt ImClone was a dog. He felt he could set a floor price of $60 or $61 just in case the stock continued to fall, as a safeguard."

She said Tuesday that she had reminded Stewart of Bacanovic's plans on Jan. 29, 2002 — just six days before she gave her first interview to investigators in the ImClone probe.

The final witness for Bacanovic's lawyers was securities expert John Maine, who testified about the dramatic drop in ImClone's stock price the day Stewart sold.

Maine said the price of the stock was "falling out of bed" while the Nasdaq Stock Market as a whole was up.

"To see a stock behaving this dramatically against the market in a vacation week is quite stunning," he said.