Stewart lawyers want some charges tossed

Erun McClam

Monday, Feb. 23, 2004 | 9:15 a.m.

NEW YORK -- Lawyers for Martha Stewart and her former stockbroker will try to persuade a federal judge today to throw out some of the charges at their stock-trading trial.

U.S. District Judge Miriam Goldman Cedarbaum will hear an hour of arguments -- 20 minutes each for Stewart, broker Peter Bacanovic and prosecutors -- on whether parts of the indictment in the case should be dismissed.

The judge appears particularly interested in whether she should strike the securities fraud count against Stewart, which accuses her of deceiving investors in her media conglomerate, Martha Stewart Living Omnimedia.

Cedarbaum referred to that charge Friday as "the most problematic" of the five counts each against Stewart and Bacanovic. She indicated it was highly unlikely she would dismiss all the counts.

Besides securities fraud, the remaining counts relate to whether Stewart and Bacanovic tried to cover up the true reason Stewart sold 3,928 shares of ImClone Systems stock on Dec. 27, 2001, just before it took a dive.

The government contends Bacanovic sent word to Stewart that ImClone founder Sam Waksal was frantically trying to sell his shares. The pair claim they had a standing agreement to unload the ImClone shares when the stock price hit $60.

The securities fraud count, which the judge herself has called "novel," refers to three statements Stewart and her lawyers made in June 2002 in which they insisted she sold because of the $60 agreement.

Prosecutors say that was a deliberate play to keep the stock price of MSLO high. Stewart owned nearly all of the voting shares in the company, and stood to lose $30 million for every dollar MSLO stock fell.