Prosecutor’s opening statement: Stewart had tip no one else had

Erin McClam

Tuesday, Jan. 27, 2004 | 9:24 a.m.

NEW YORK -- Domestic doyenne Martha Stewart lied and committed "serious federal crimes" by selling off nearly 4,000 shares of stock based on a tip no one else had, a federal prosecutor charged today.

"She was told a secret that no other investor had," Assistant U.S. Attorney Karen Patton Seymour said in opening statements in Manhattan.

Seymour, addressing the jury, said Stewart had lied to federal agents, and "multiplied that lie by feeding it to investors in her own company."

One count accused Stewart of deliberately trying to prop up the stock of her own company, Martha Stewart Living Omnimedia, by saying in 2002 that she had done nothing wrong and was cooperating with investigators.

Among those in the first-floor courtroom for the start of the trial were Stewart's daughter, Alexis, and her mother, Martha Kostyra.

Stewart is accused of working with her stockbroker to concoct a story about why she sold 3,928 shares of ImClone Systems on Dec. 27, 2001 -- just before it plunged on a negative government review of an ImClone cancer drug.

The government claims Stewart was tipped that ImClone founder Sam Waksal was trying to dump his own shares. Stewart and the broker, Peter Bacanovic, say they had a pre-existing agreement to sell the stock when it fell to $60 per share.

On Monday, U.S. District Judge Miriam Goldman Cedarbaum told jurors it was critical that they decide the case only on the evidence -- and ignore the onslaught of media coverage surrounding Stewart's every move.

"If you see a headline about the case, turn the page. Look at another story," the judge said after jurors took an oath of service. "If you hear something about the case, change the channel."

The judge has already complained about heavy pretrial publicity that, in her estimation, has gone beyond the public's right to know. She banned reporters from watching jury selection.

The jury includes eight women and four men from diverse backgrounds, including a reverend, a translator and a pharmacist familiar with the style guru's recipes.

Many of them told Cedarbaum they had read or heard about the case already. But they described only vague knowledge of the case, and assured the judge they could be impartial.

One of the jurors is a pharmacist originally from Uganda who said she had seen Stewart frequently "in the TV sometimes -- her cooking recipes and stuff."

One juror is a paralegal who translates Italian and owns stock in Merrill Lynch & Co. -- the brokerage where Bacanovic managed Stewart's account, including the ImClone shares.

Another is a reverend who told the judge she counsels married couples.

Even before opening statements began, the judge dealt Stewart a setback. Cedarbaum said Stewart's defense could not argue that she is being prosecuted merely for claiming she was innocent.

The government was expected to call a Merrill Lynch compliance officer as one of its first witnesses, to talk about the company's manual for brokers -- a manual prohibiting brokers from discussing one client's affairs with another.

Prosecutors say Bacanovic sent word to Stewart through an assistant that Waksal was trying to unload his ImClone shares.