A federal judge overseeing the stock fraud trial of Westport’s Martha Stewart today limited the government’s effort to prove Stewart and her stockbroker conspired to lie about her sale of ImClone Systems stock.
The judge blocked prosecutors from putting into evidence a voice mail that broker Peter Bacanovic left for Stewart on Feb. 4, 2002, the day she was first interviewed by the government in the ImClone investigation.
“The fact that he tried to contact her really isn’t evidence of anything, other than that they talked to each other sometimes,” U.S. District Judge Miriam Goldman Cedarbaum said.
The essence of the conspiracy charge is that Stewart and Bacanovic worked together to hatch a cover story for why Stewart sold 3,928 shares of ImClone Systems stock on Dec. 27, 2001.
The government claims Bacanovic ordered his assistant to tip Stewart that ImClone founder Sam Waksal was trying to sell his shares. Stewart and the broker say they had arranged earlier to sell ImClone when it fell below $60 a share.
Prosecutor Karen Patton Seymour argued the voice mail placed just after 7 a.m. on Feb. 4, 2002 is evidence of Bacanovic’s state of mind in the alleged conspiracy. Stewart gave the first of two interviews to investigators later that day.
The judge also limited what prosecutors can argue about two other calls between Stewart and Bacanovic on Jan. 25, 2002, the day Stewart was informed that federal prosecutors wanted to speak with her.
Cedarbaum said those calls can only be used to show the pair spoke with each other. “I don’t think you can argue that there is significance to the date without knowing the content of the call,” she said.
On Friday, the judge barred prosecutors from putting into evidence a record of a phone call from Bacanovic to Stewart on Jan. 31, 2002, just after, according to testimony, Stewart changed a message log of a Dec. 27 Bacanovic call.
Stewart immediately told her assistant to change the message back to its original wording, testimony showed.
The new setbacks to the government also came on the heels of the judge’s ruling on Friday that blocks prosecutors from calling expert witnesses as they try to show Stewart committed securities fraud.
That charge accuses the domesticity maven of propping up the stock price of her own company, Martha Stewart Living Omnimedia, by falsely claiming she was innocent and cooperating with investigators in the ImClone probe.
The ruling Friday means prosecutors will not be allowed to call stock analysts as witnesses to show what effect Stewart’s statements had on the stock price. They may still be allowed to call individual investors.
Securities fraud, carrying up to a 10-year prison term, is the most serious of the five counts against Stewart. The other four – conspiracy, obstruction of justice and two counts of making false statements – carry five years apiece.
The arguments on the phone calls came outside the jury’s presence today, the start of the fourth week of Stewart and Bacanovic’s trial in Manhattan federal court.
In front of the jury, prosecutors and an FBI special agent walked through a step-by-step, full-color graphic on a projection screen that showed ImClone-related phone calls on Dec. 27, 2001.
Those calls included some from Waksal’s daughters and his accountant, all wanting to sell ImClone shares. Waksal later admitted advance knowledge of the negative government report that would soon send the stock on a sharp decline.
But prosecutors were limited by the judge in their presentation of the chart. Cedarbaum ordered the government to black out references to ImClone’s falling stock price on Dec. 27, and to e-mails sent the same day.
The judge said prosecutors could tie all the information together as part of their closing argument – but not in a single piece of evidence.
This afternoon, prosecutors put into evidence dozens of records from a system Bacanovic used to log call and meetings he had with clients at Merrill Lynch & Co.
The records contained notes of discussions Bacanovic and Stewart had in late 2001, but no reference to ImClone between Oct. 26 and Dec. 26.
Prosecutors were apparently introducing the records to shoot down Bacanovic’s insistence he and Stewart agreed to sell ImClone when the price fell to $60 per share.
Prosecutors said last week they intend to rest their case Thursday. The defense is likely to take several weeks, meaning the case should go to jurors in March.
Regardless of what the judge does to “limit” the government’s case, Martha Stewart is going to lose this trial. I owned a small brokerage firm in Manhattan and I was shut down by the government for Obstruction of Justice and Securities fraud. During my trial, I learned that in Federal court, all evidence “must be looked upon in favorable light to the Government’s” argument. No matter what happens, there is already enough evidence to convict her of Obstruction charges. She has a small chance to escape the Securities fraud charge.
I learned at an early age that anytime someone from the government comes knocking on your door, don’t talk to them because they are there to hurt you.
Martha Stewart is an American hero and hurting her doesn’t just hurt her, it hurts all of the employees and stockholders of her enterprise.
All for the ego trip of a few overzealous prosecuters who let the savings & loan debacle get swept under the carpet.
MARTHA DID THE CRIME SHE SHOULD DO THE TIME.SHE SHOULD NOT PASS GO. SHE SHOULD GO STRIGHT TO JAIL