Secretary: Martha Changed Her Message

02/10/2004 AT 04:18 PM EST

One day after breaking down on the witness stand, Ann Armstrong, a former assistant to Martha Stewart, regained her composure long enough to dish up some damaging testimony against the beleaguered former CEO.

In her first appearance on the stand Monday, Armstrong broke into tears while recounting a gift of plum pudding that Stewart had given her. Armstrong remembered thanking Stewart immediately before delivering a message from Stewart's broker Peter Bacanovic regarding his prediction of ImClone Systems' stock slide, Reuters reports.

Whether Martha received such a message -- and then acted on it by selling her shares of ImClone -- is at the crux of the government's case against Stewart, 62, and Bacanovic, 41.

The message, which was delivered Dec. 27, 2001, initially was, "Peter Bacanovic thinks ImClone is going to start trading downward." Armstrong testified that she was present when Stewart gained access to a computerized log a month later and changed a typed entry to read, "Peter Bacanovic re: ImClone." "I was standing behind her" when the message log was changed, Armstrong said.

But Stewart then "told me to put it back the way it was," Armstrong added, according to published reports.

The prosecution hopes to demonstrate that Stewart willfully tried to hide the details of her ImClone sale. Both Stewart and Bacanovic insist that Stewart had a standing order to sell the stock if the price fell below $60 a share. The pair are charged with lying to investigators about the details of the ImClone sale. Stewart also is charged with misleading investors in her company, Martha Stewart Omnimedia Inc.

But when asked on cross-examination by Stewart's attorney whether Stewart had ever instructed her to lie about the incident, Armstrong replied, "No."

Investigators initially questioned Stewart about Bacanovic's message during an interview in February 2002. At the time she said that she did not know if the message had been recorded.

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