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AMERICAN MORNING

Martha Stewart Case

Aired February 11, 2004 - 08:11   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

SOLEDAD O'BRIEN, CNN ANCHOR: The government's case against Martha Stewart might actually have been strengthened by Stewart's own assistant.
Deborah Feyerick is covering the trial live from federal court here in New York City -- hey, Deb, good morning.

DEBORAH FEYERICK, CNN CORRESPONDENT: Hey, Soledad.

Well, there were a number of phone messages that were introduced into evidence. All of them had been left by Stewart's broker. All of them discussed ImClone. And so the one that was left on the day of the controversial trade would have really seemed pretty ordinary, except for the fact that Martha Stewart tried to change it.

(BEGIN VIDEOTAPE)

FEYERICK (voice-over): Several days before Martha Stewart was to meet federal investigators, she had her secretary pull up two week's worth of phone logs to send to her lawyers. Scrolling through the messages, Stewart saw one left by her broker the day of her controversial stock sale. It read, "Peter Bacanovic thinks ImClone is going to start trading downward." Stewart's secretary testified, "Martha saw the message from Peter and she instantly took the mouse and put the cursor at the end of Peter's name."

Secretary Ann Armstrong says, "Stewart began typing over the message, replacing it with, 'Peter Bacanovic about ImClone.'"

Armstrong says Stewart instantly stood up, and still standing at my desk, she said, "Put it back. Put it back the way it was."

Stewart's been charged, among other things, with obstruction of justice. Under cross-examination, her secretary acknowledged Stewart never told her to lie or conceal the incident; instead, pressing her to recover the original message. Armstrong testified with the help of a writer at Stewart's magazine, she tracked down the broker's first message in a computer trash can. Armstrong faxed a copy to Stewart's lawyers as intended. Then she printed out a copy for herself, sealed it in a manila envelope and told a friend she'd be keeping it in storage. She was not allowed to tell the jury why.

(END VIDEOTAPE)

FEYERICK: Now, Stewart was questioned about Bacanovic's messages when she met with investigators from the Securities and Exchange Commission. Yesterday, an SEC lawyer testified that when she was asked, Stewart said she couldn't remember the exact nature of the message, only that Peter Bacanovic needed to talk to her by the end of the day -- Soledad.

O'BRIEN: Deb Feyerick for us this morning.

Deborah, thanks.

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