This is the ninth day of the stock fraud trial of Westport’s Martha Stewart and it began today with her lawyer trying to end the proceeding by asking for a mistrial. The federal judge overseeing the case promptly denied the motion.
The attorney, Robert Morvillo, said the government’s charges, which include reference to a “secret tip,” were really about insider trading, meaning he should be allowed to try to exonerate Stewart by showing such trading never occurred.
“I have the right to prove a lack of motive by proving there was no insider trading,” Morvillo told the court shortly after the day’s proceedings began.
“You’re saying this trial is being transferred to an insider trading trial?” Judge Miriam Goldman Cedarbaum said.
“You read a secret tip as insider trading. That’s not a ground for dismissing the indictment.” And she dismissed the mistrial request.
The surprise move by Morvillo came as a lawyer from the SEC was about to take the stand for a second day to discuss Stewart’s interview with regulators about her now well known sale of ImClone Systems stock in late 2001.
The lawyer, Helene Glotzer, had questioned Stewart twice in 2002 about her sale of ImClone stock.
Morvillo tried to show that Glotzer has given biased testimony against Stewart.
Morvillo also tried to draw out details of Glotzer’s close work with the federal prosecutors handling the case. The SEC, prosecutors and the FBI routinely conduct joint white-collar investigations.
“Is it your hope that the government wins this case?” Morvillo asked.
“Yes,” Glotzer said. “I believe in the case.” But she stressed she was a “fact witness” who had no bias in her testimony.
Prosecutors have placed Glotzer on the stand in hopes of laying the foundation for what they say are repeated lies by Stewart in 2002 about why she sold 3,928 shares of ImClone stock on Dec. 27, 2001.
Stewart told the SEC in 2002 that she did not remember being tipped that ImClone CEO Sam Waksal was trying to dump his shares on the same day that she did, according to Glotzer’s testimony.
Stewart also claimed in two SEC interviews that stockbroker Peter Bacanovic handled her sale of ImClone that day. It was actually Bacanovic’s assistant, Douglas Faneuil, who took the order.
The day after the stock sale, ImClone announced disappointing news about a cancer drug that sent the shares on a quick 18 per cent decline. Waksal later admitted having insider knowledge of the news.
Stewart and Bacanovic are accused of cooking up a cover story for the sale – that they had agreed earlier to get rid of Stewart’s shares if the price fell below $60.
Under questioning from Morvillo, Glotzer said the SEC had not provided Stewart a form before a February 2002 interview that advises interviewees that lying to the agency is a crime.
But under questioning from prosecutor Michael Schachter, Glotzer said SEC routinely does not provide the form when it conducts joint interviews with prosecutors. And she said Stewart was clear on what the agency expected.
“She was advised to be truthful, and that she could speak to her counsel at any time,” Glotzer said.
Glotzer testified Tuesday that in her first interview with Stewart in February 2002, she questioned Stewart about her ImClone stock sale.
The SEC investigator said that when she asked Stewart about a telephone message from Peter Bacanovic, her broker at Merrill Lynch, Stewart said she didn’t know whether the message had been recorded in the computerized log.
Glotzer’s testimony came after Stewart’s assistant testified Tuesday that Stewart personally changed a Dec. 27, 2001, phone message from Bacanovic telling her that ImClone stock would start falling, but then changed the message back.
