Stewart Altered Phone Log, Says Aide

Martha Stewart was hit by further damaging testimony yesterday when her personal assistant said Ms Stewart had altered a potentially significant phone record from her broker.

Ann Armstrong recounted events on January 3 2002, that appeared to give weight to the government's obstruction of justice charges.

She said Ms Stewart, on trial alongside her former Merrill Lynch broker Peter Bacanovic, had asked to see the phone messages for December 27, 2001, the day she sold nearly 4,000 shares in the drug company ImClone Systems.

Ms Armstrong testified that Ms Stewart hovered over the message on her computer screen that read: "Peter Bacanovic thinks ImClone is going to start trading downward."

Ms Armstrong said: "She highlighted from the end of Peter's name and then she started typing over that." While seated at Ms Armstrong's desk she changed the message to read "Peter Bacanovic re ImClone," the assistant testified. Then Ms Stewart apparently had a change of heart. "She instantly stood up and still standing at my desk said 'put it back, put it back the way it was'."

Ms Armstrong has worked for Ms Stewart for five years and said she could not remember a similar request.

The government's key witness, Mr Bacanovic's former assistant Douglas Faneuil, earlier testified that he was ordered by his boss to tip off Ms Stewart that Sam Waksal, the founder of ImClone, and members of his family were trying to offload their shares in the company that day.

The prosecution contends that the attempt to alter the computer record was a part of a cover-up to hide the fact that she received the improper tip. Ms Stewart and Mr Bacanovic maintain they had a pre-arranged agreement to sell the ImClone shares at $60.

When asked about the telephone message during an interview with investigators in February 2002, Ms Stewart allegedly said she did not know whether the phone message from Mr Bacanovic had been entered into a computer log.