Stewart team mocks case of prosecution

Lawyers say defendants wouldn't be that `dumb'

`Confederacy of dunces'

Closing arguments given for her, stockbroker

March 03, 2004|By Jean Marbella | Jean Marbella,SUN NATIONAL STAFF

NEW YORK - Successful, accomplished people such as Martha Stewart and Peter E. Bacanovic probably don't have to hear that snippy question: If you're so smart, why aren't you rich? But as attorneys for the gracious-living entrepreneur and her stockbroker gave their final statements before the jury begins deliberations today, Stewart's lawyer left them yesterday with something of an inversion of that question:

If Stewart and Bacanovic are so rich, why aren't they smarter? Smarter, that is, when it came to conspiring and obstructing justice, as prosecutors accuse them of doing when asked about the suspicious timing of Stewart's sale of her stock in the biotechnology company ImClone Systems Inc.

Stewart's lawyer, Robert G. Morvillo, mocked the government's case against the two defendants, saying that if two people so smart elsewhere in their lives had truly entered into a criminal conspiracy, it wouldn't have been as haphazard a scheme as prosecutors have described.

"The government has accused Martha Stewart of participation in a confederacy of dunces, because nobody could have done what Peter Bacanovic and Martha Stewart are alleged to have done and done it in a dumber fashion," Morvillo said in his summation.

"They weren't on the same page," Morvillo said. "They weren't even in the same book."

Yesterday's conclusion of two days of closing arguments were the last opportunity government and defense attorneys had to address the jury. Today, U.S. District Judge Miriam Goldman Cedarbaum will instruct the jurors on the aspects of law that they must apply to the case, and then they will retire behind closed doors to begin deliberations.

Prosecutors have said Stewart and Bacanovic concocted a pre-existing agreement that Stewart would sell her ImClone stock if the market price dropped to $60 as a way of concealing the real reason she sold nearly 4,000 shares on Dec. 27, 2001. Rather, prosecutors said, she sold the stock because Bacanovic, through an assistant, tipped her off to the fact that ImClone founder Samuel D. Waksal and his family had been trying to dump their shares that morning.

Waksal, serving a seven-year prison term for insider trading, had received advance word that on the next day, the Food and Drug Administration would reject ImClone's application for its anti-cancer drug, Erbitux, and acted to unload his stock before its price plummeted in the wake of the bad news.

While Stewart was not charged with insider trading, she is accused of lying about the fact that she used nonpublic information - that the Waksals were trying to sell their stock - to similarly dump her shares.

Relying on memories

But Morvillo, while conceding that Stewart received the tip, maintained that the tip about Waksal wasn't why she sold that day; rather, ImClone was starting to trade downward, approaching the $60 floor, so she agreed with Bacanovic's recommendation that she sell.

The fact that Stewart and Bacanovic, when questioned by federal agents, often offered differing details - including when they made the $60 agreement and who handled the actual stock sale - proves that rather than conspiring they were independently relying on their memories, which sometimes proved faulty, Morvillo said.

Both were interviewed repeatedly, offering numerous occasions when they could have made their stories match, and yet they didn't, he said. "Wouldn't they have coalesced their stories?" he asked.

"So what kind of conspiracy is this?" Morvillo said. "It's a conspiracy of dunces."

But lead prosecutor Karen Patton Seymour countered that smart people do stupid things all the time.

"Your common sense tells you white-collar criminals do that every day," she said, pointing to Waksal himself, who tried to dump his ImClone shares the day before the negative FDA announcement, something he surely should have known would instantly be detected as insider trading.

"For whatever reason, smart people make mistakes," she said. "They do dumb things."

To believe the government's version of the case, Morvillo said, is to believe that Bacanovic, when asked about the ImClone sales, invented the $60 story, and then asked Stewart to risk the dazzling career she had developed to go along with his plan to lie and cheat and otherwise engage in criminal behavior.

And, even more unbelievably, Morvillo continued, Stewart agreed.

"Martha Stewart said, `Of course,'" he said sarcastically. "`Why not? Wouldn't that be fun?'"

Morvillo said Stewart's actions surrounding the ImClone sales were perfectly consistent with what she and Bacanovic had been trying to accomplish with the rest of her portfolio. She had held on to her ImClone shares against Bacanovic's advice - he considered the stock "a dog" - out of loyalty to her close friend, Waksal, but was beginning to have second thoughts, her lawyer said.

"She's looking at her portfolio: `I'm holding these stocks too long in a down market,'" Morvillo said.

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