Close friend provides damaging testimony against Martha Stewart

<br>NEW YORK (AP) _ A close friend of Martha Stewart who told a damaging story about the homemaking expert wavered slightly in her testimony Friday as the government neared the end of its case. <br><br>On

Friday, February 20th 2004, 12:00 am

By: News On 6

NEW YORK (AP) _ A close friend of Martha Stewart who told a damaging story about the homemaking expert wavered slightly in her testimony Friday as the government neared the end of its case.

On Thursday, Mariana Pasternak testified Stewart told her shortly after selling her ImClone Systems stock that she had known ImClone founder Sam Waksal was trying to dump his shares. Pasternak also testified that Stewart told her in a separate conversation: "Isn't it nice to have brokers who tell you those things?"

But under cross-examination Friday from Stewart's lawyer, Pasternak conceded about that remark: "I do not know if that statement was made by Martha or if that was just a thought in my mind."

Prosecutor Michael Schachter, trying to restore Pasternak's credibility, asked what her "best belief" was about the remark. Pasternak answered: "That Martha said it."

Pasternak did not waver in the central element of her testimony _ that Stewart was aware when she sold her ImClone stock on Dec. 27, 2001, that Waksal had been trying to sell as well.

Stewart told investigators in April 2002 that she had no memory of being told about Waksal just before she sold. Stewart and her co-defendant, stockbroker Peter Bacanovic, claim they had a standing agreement to sell ImClone when the stock price fell to $60. The government contends that was a cover story.

The government planned to rest its case Friday afternoon, and the defense was to begin presenting its witnesses. There was no immediate indication of whether Stewart or Bacanovic would take the stand.

Also, Stewart lawyer Robert Morvillo was expected to ask U.S. District Judge Miriam Goldman Cedarbaum to dismiss all or some of the charges.

Morvillo has been particularly adamant about a charge of securities fraud that accuses Stewart of deceiving investors in her own company, Martha Stewart Living Omnimedia, by publicly asserting her innocence.