by TChris

The testimony of a key prosecution witness against Martha Stewart and her stock broker, Peter Bacanovic, has been delayed because prosecutors withheld documents from the defense that could cast doubt upon the witness' credibility. The witness, Douglas Faneuil, is now expected to testify on Thursday, a week after the originally scheduled date. Prosecutors expect Faneuil to say that he alerted Stewart to the fact that the company's founder, Sam Waksal, was selling large amounts of his stock in ImClone Systems Inc. Stewart sold 4,000 shares of ImClone stock after Faneuil allegedly gave her that tip.

At issue is an ambiguous statement that Faneuil's former defense lawyer Jeremiah Gutman gave investigators a year ago.

The defense interpreted the document to read that Gutman told investigators that Faneuil could not recall whether Bacanovic or Waksal instructed him to tip off Stewart. However, prosecutors said it was Gutman with the faulty memory. They said it was Gutman himself who could not recall Faneuil's statement about which man gave the order.

If enough doubt can be established as to who ordered Faneuil to reveal confidential stock information, it could undermine the government's charges that Bacanovic lied about his involvement in Stewart's suspicious stock sale.

While the withheld information may not have a direct impact upon the charges against Stewart, any evidence casting doubt upon the credibility of a prosecution witness should be helpful to her defense. This seems to be another case of over-zealous prosecutors deciding for themselves that evidence isn't exculpatory (regardless of how others might view it) and neglecting their obligation to share evidence that might benefit the defense.