NEW YORK Testimony gets under way in trial over Martha Stewart's stock sale

The jury heard three hours of opening statements.
NEW YORK (AP) -- Prosecutors began laying the foundation of their case against Martha Stewart, while her attorney suggested the government's pursuit of the homemaking queen was reminiscent of George Orwell's Big Brother novel "1984."
Stewart's trial got under way Tuesday before a jury of eight women and four men. They heard three hours of opening statements that outlined starkly different portrayals of Stewart's sale of nearly 4,000 shares of biotechnology company ImClone Systems.
First witness
The prosecution's first witness, a Merrill Lynch & amp; Co. official, testified that Stewart's ex-stockbroker -- accused of tipping Stewart off that ImClone founder Sam Waksal was dumping his company's stock -- had signed an agreement prohibiting firm employees from discussing one client's transactions with another.
"It's important for us," the official, Luciano Moschetta, testified. "Because the relationship we have with our investors is based on trust."
Prosecutors say Stewart and the broker, Peter Bacanovic, later lied to cover up the tip. Waksal later admitted he had early word of a negative government report about ImClone.
Stewart sold that day as well, and the stock plummeted when the government report became public. The government says Stewart and Bacanovic repeatedly lied to investors about the circumstances of the sale.
The two say they had struck a deal earlier in December to sell Stewart's 3,928 shares of ImClone when it fell to $60 per share.
Drug application
The other government witness who testified Tuesday was Daniel Lynch, acting CEO of ImClone, who told jurors about the mechanics of the company's application for government approval of the drug Erbitux in 2001.
U.S. District Judge Miriam Goldman Cedarbaum ordered the trial suspended for today because of heavy snow forecast for the New York area.
Testimony was to resume Thursday -- probably including Douglas Faneuil, a former Merrill assistant and the government's star witness against Stewart and Bacanovic.
Faneuil is expected to testify that he passed the Waksal tip from Bacanovic to Stewart -- testimony that, if jurors believe it, would poke holes in the Stewart-Bacanovic $60 agreement.
Lawyers for both defendants have already hinted they will attack Faneuil's credibility, portraying him as a repeated liar who was willing to tell the government anything it wanted to hear in exchange for a plea deal.
The testimony comes after attorneys for all three parties in the trial -- the government, Stewart and Bacanovic -- presented impassioned opening statements.
Prosecution's assertion
Assistant U.S. Attorney Karen Patton Seymour said Stewart had sold ImClone on "a secret tip" that no one else had, then told an avalanche of lies to save her reputation and enormous fortune.
And she said Bacanovic made sure that word of Waksal's sale was passed along to Stewart.
"He knew he couldn't do it," she said. "But he didn't want his friend Martha Stewart sitting on a stock that was about to be obliterated by bad news."
Stewart attorney Robert Morvillo suggested the government's pursuit of the domestic style-setter was reminiscent of George Orwell's Big Brother novel "1984."
He lashed out at Congress for leaking in the summer of 2002 that Waksal had directly tipped Stewart about the Erbitux decision, suggesting it was the work of politicians hungry for attention in the midterm election.
"Same government -- leak it on one side, prosecute it on the other," Morvillo said disdainfully. "I think that George Orwell was just about 20 years too early," he said, alluding to the novel "1984" that described an all-intrusive government.
Morvillo never flatly denied that Stewart was tipped to the Waksal sale. But he described Stewart in December 2001 as weary from the holidays, and finally willing to follow Bacanovic's repeated suggestions to get rid of ImClone.