Saturday, February 21, 2004

Prosecution rests its case at Martha Stewart trial

By Erin McClam
The Associated Press

NEW YORK - The government rested its case Friday against Martha Stewart and her stockbroker, and a judge said she would hear arguments next week on whether some charges in the case should be thrown out.

Prosecutors called 21 witnesses in 14 days of testimony, all designed to prove that Stewart lied about why she sold 3,928 shares of ImClone Systems stock in December 2001.

Lawyers for the homemaking mogul and her broker, Peter Bacanovic, planned to spend the weekend drawing up papers urging U.S. District Judge Miriam Goldman Cedarbaum to dismiss all counts against each defendant.

The government contends that Bacanovic sent word to Stewart Dec. 27, 2001, that ImClone CEO Sam Waksal was trying to dump his shares in the company. Stewart sold hers that day, netting about $225,000.

Stewart and Bacanovic say they had a standing agreement that her ImClone shares would be sold when the stock fell to $60.

The judge appeared to be most concerned about a count of securities fraud that accuses Stewart of deceiving investors in her own company, Martha Stewart Living Omnimedia, by asserting that her ImClone sale was based on the $60 order.

Cedarbaum called that count "the most problematic" in the indictment, and urged lawyers to focus on whether Stewart had criminal intent - not just a motive - to lie to her investors.

In a brief argument on the matter Friday, prosecutor Karen Patton Seymour pointed to remarks Stewart made at an investor conference on June 19, 2002, when she insisted she had a $60 selling agreement for ImClone.

The government contends that Stewart made several statements in June 2002 to prop up the stock price of Martha Stewart Living. Stewart stood to lose $30 million for every dollar the stock dropped at the time.

"She knew and she hoped investors would rely on her word," Seymour said. "She didn't just say it for no reason. She said it purposefully."

Stewart lawyer Robert Morvillo said Stewart was truthful in the essential part of her remarks that day - that she was never tipped directly by Waksal about the coming government refusal to review an ImClone drug that sent the shares tumbling.

While media speculation at the time focused on whether Stewart had engaged in insider trading, she was never accused of knowing about the drug review in advance - only of knowing that Waksal was trying to sell.

In front of jurors Friday, a critical prosecution witness wavered slightly about testimony that had damaged Stewart.

Mariana Pasternak, a close friend of Stewart, testified Thursday that Stewart told her shortly after selling ImClone stock that she had been aware Sam Waksal was trying to dump his shares.

In a separate conversation, Pasternak testified, Stewart told her, "Isn't it nice to have brokers who tell you those things?"

But under cross-examination Friday by Morvillo, Pasternak said it was possible that remark was simply a thought that crossed her own mind - not something Stewart said.

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