Martha Stewart trial: Grim iced with glitter

Fraud: The lure of celebrity and money draws interest to a case of alleged insider trading.

January 28, 2004|By Jean Marbella | Jean Marbella,SUN NATIONAL STAFF

NEW YORK - Looking as grim as if her designer rose bushes just dropped dead or her souffle simply refused to rise, Martha Stewart sat through the first day yesterday of a trial in which she is accused of crimes beyond the domestic - using inside information to dump stocks before they plummeted in value and then lying to federal investigators about it.

The guru of gracious living, charged with conspiracy and obstruction of justice, drew a full house to the federal courthouse here for yesterday's opening statements, eager to see firsthand a trial that straddles the intersection of the two themes currently consuming the public's attention - corporate malfeasance and celebrity misbehavior.

Among those watching were ABC news personality Barbara Walters and chronicler of the rich-and-famous Dominick Dunne, as well as Stewart family members and friends familiar to those who watch her TV shows or read her magazines.

Stewart sat largely expressionless as assistant U.S. Attorney Karen Patton Seymour laid out the government's case against her: That she sold her stock in a friend's biotech company after being tipped off to bad news that would cause its market price to plummet, and that she lied about her actions to federal investigators and investors in her own company.

"The reason that Martha Stewart dumped her shares is because she was told a secret," Seymour said, "a secret tip that no other investors had."

Speaking to a jury of eight women and four men, Seymour kept on message describing alleged actions of Stewart and co-defendant Peter Bacanovic, a former stockbroker: "Peter Bacanovic and Martha Stewart decided to lie." "She multiplied that lie." "This was pure fiction, a totally made-up lie." "This was a pure and simple lie."

Stewart drew the interest of federal investigators when they learned that she had sold nearly 4,000 shares of stock in the biotech firm ImClone on Dec. 27, 2001, the day before news became public that the company would not receive Food and Drug Administration approval for its anti-cancer drug.

She was able to sell those shares at a profit of about $50,000 before the price dropped in the wake of the news.

Seymour said Bacanovic, through his assistant, gave Stewart inside information that allowed her to sell before the stock price plummeted. But Stewart's attorney said Stewart was told only that ImClone's chief executive officer, Sam Waksal, and his family were dumping their shares, causing a wild market fluctuation that day, and that she should also sell.

Stewart's attorney, Robert Morvillo, depicted her as a victim of a government that selectively prosecuted her. He noted that Stewart's sale of fewer than 4,000 shares of ImClone stock was a mere fraction of the total 7 million sold that day.

Morvillo, outlining how the case against Stewart also involved selective leaks of information by Congress, characterized her as a hardworking, self-made woman helpless against a multipronged federal attack.

Morvillo offered a contrasting vision of the events of Dec. 27, 2001. In his telling, a "weary Martha Stewart starts on a well-deserved vacation and she goes to Mexico with friends."

But Dec. 27 also turns out to be the day "Sam Waksal decides to go crazy," Morvillo said. "What he did that day was an act of sheer insanity."

Waksal dumped his own stock, as did some of his relatives, in advance of the FDA decision becoming public, Morvillo said, and the price of ImClone stock began to drop.

Stewart previously had told Bacanovic that she would consider selling her shares if their price dropped below $60, and so she agreed to sell her shares that day, Morvillo said.

The Stewart trial has drawn intense interest, although an impending snowstorm meant not only that today's proceedings were canceled but that not as many onlookers turned out to watch the defendants and their lawyers make their way in and out of the courthouse through a media gantlet.

Still, there were sights to be seen - ABC's Walters coming in as the trial broke for lunch, and Stewart's mother, Martha Kostyra, familiar to viewers of the lifestyle diva's TV show in which she occasionally demonstrates family recipes.

While Stewart remained in the courthouse during lunch, her mother, walking with a cane and supported on one arm by another daughter, Kathy Evans, provided fodder for news photographers as she walked shakily down the multiple steps in icy cold and wet weather during the midday break.

Others making appearances included Stewart's daughter, Alexis, who introduced her mother to both Bacanovic and Waksal; and friend Jane Heller, who has appeared on her pal's TV show as a sort of anti-Martha, all thumbs in the kitchen as Stewart flawlessly whisks her eggs or decorates her cakes.

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