Accused senator calls key witness a liar

WASHINGTON (Reuters) - Veteran U.S. Sen. Ted Stevens of Alaska called the prosecution's star witness a liar on Friday at his corruption trial that could decide both his political future and the Senate's makeup.

Stevens, one of the Senate's most powerful Republicans who influences how money is spent in the United States, flatly denied key testimony by the prosecution's chief witness, Bill Allen, an Alaska businessman who had been his close friend.

Allen testified earlier in the trial that Stevens, the longest-serving Republican in Senate history, knew he was not getting billed for all the renovations on his home in Girdwood, Alaska, and just wanted the invoices to protect himself.

"That's just an absolute lie," Stevens said. The lawmaker also denied telling Allen that he knew more work had been done on his house than he had paid for.

Stevens, 84, is accused of lying on financial disclosure forms filed with the Senate to conceal more than $250,000 in home renovations and other gifts from Allen and his Alaska oil services firm VECO Corp, one of the state's largest employers.

The trial could seal the political fate of Stevens, who has been in the Senate for 40 years and is seeking to keep his seat in the November 4 elections.

A guilty verdict would make Stevens's re-election bid more difficult, meaning the trial's outcome could influence the Democratic Party's attempt to widen its narrow majority in the Senate.

After he finished testifying in his defense, Stevens faced sharp questioning during his cross-examination by Justice Department prosecutor Brenda Morris.

"You were a lion of the Senate, but you didn't know how to stop this man from putting big ticket items at your home?" asked Morris. She asked why Stevens did not just ask Allen to return his house keys if the lawmaker did not want the gifts.

Stevens, whose demeanor became more combative during the questioning by Morris, said Allen was a good friend who he trusted. He told the prosecutor, "You are making a lot of assumptions that are not warranted."

Stevens first took the witness stand on Thursday. At the start of his testimony he denied he had ever tried to hide gifts by filing false financial disclosure forms.

The trial could come down to whether the jurors believe Stevens or Allen, who reached a deal to cooperate with prosecutors and to plead guilty to bribing state legislators. Jury deliberations could begin early next week.

Stevens sought to persuade jurors that his lawyer-wife Catherine had been the one mainly responsible for the renovation, arranging a $100,000 loan and writing all the checks. "She got all the bills and paid all the bills," he said.

Prosecutors have argued that Stevens knew he was getting more work than he was paying for and intentionally concealed it from his disclosure forms.

They have introduced testimony that Allen and VECO arranged for such items as architectural drawings, electrical, heating and plumbing work, a new outside deck and roof work.

Stevens is the first sitting senator in 27 years to testify in his defense at a criminal trial.

The last was Harrison Williams, a New Jersey Democrat, who was convicted in 1981 of bribery charges stemming from an FBI sting in which federal agents posed as Middle Eastern businessmen and bribed members of Congress.

(Editing by Anthony Boadle)