With eight weeks to go before her trial, Westports Martha Stewart lost a round in federal court today in connection with insider trading-related charges against her.
U.S. District Judge Miriam Goldman Cedarbaum refused to dismiss a securities fraud charge against Stewart on First Amendment grounds, saying the government was entitled to prosecute her for statements she made.
Cedarbaum read the ruling from the bench at the start of a hearing. The government had insisted all five charges should be preserved.
The judge said she could not dismiss the securities fraud charge that accused Stewart of making false statements to protect the value of her company’s stock.
“Such false factual statements are not protected by the First Amendment,” Cedarbaum said.
Stewart, 62, is accused of conspiracy, obstructing justice, securities fraud and two counts of lying to investigators in connection with her Dec. 27, 2001, sale of about 4,000 shares of ImClone Systems stock. The judge also refused to throw out the obstruction charge.
The judge said the defense had challenged the obstruction of justice charge prematurely. She said it would be appropriate to do so only after the government had presented its case to a jury.
Stewart’s defense team claims the securities fraud count, in which the government accuses her of deceiving shareholders in her own company by saying she was innocent and was cooperating with investigators, is unconstitutional.
The lawyers also say the obstruction count should be dismissed because none of Stewart’s statements to investigators could have hindered the federal investigation into her stock sale.
The government says both charges are proper. And prosecutors have defended the securities fraud count by saying Stewart engaged in a pattern of lying to her own shareholders while the government was investigating the ImClone sale.
The charges against Stewart carry a potential prison term of 30 years, although she would get far less if convicted under federal sentencing guidelines.
