Stewart Lawyers Seek to Dismiss Charges
Oct 6, 7:22 pm ET
By Paul Thomasch
NEW YORK (Reuters) - Martha Stewart's lawyer urged a judge on Monday to dismiss the most serious criminal charges against the lifestyle trend-setter, calling the government's accusations "as unusual as they are unfair."
Stewart is due to face trial early next year for securities fraud, obstruction of justice, conspiracy and making false statements to investigators looking into suspicious stock trades of a company -- ImClone Systems (IMCLE.O) -- run by a friend.
Coming after a string of corporate scandals, the case involves one of the business world's best known executives: a former model and stockbroker who became a fashion, decorating and media power by founding her own company, Martha Stewart Living Omnimedia Inc. (MSO.N)
Now Robert Morvillo, her lawyer, has asked a federal judge to drop the obstruction of justice and securities fraud charges against her.
"The charges against Martha Stewart stem from a seventeen-month investigation into whether she engaged in insider trading. The indictment contains no such charge," he wrote in a 122 page motion.
"Instead, the government brings criminal charges for making false statements to obstruct an insider trading investigation that concluded that Ms. Stewart did not commit criminal insider trading. The charges are as unusual as they are unfair."
The motion argued the obstruction of justice charge should be dismissed since Stewart did not make any statements that hindered an investigation by regulators at the Securities and Exchange Commission.
"The indictment does not adequately allege that she was even aware of the SEC investigation when the statements were made," her legal team said in a release.
U.S. prosecutors began scrutinizing Stewart during an investigation of her friend Samuel Waksal, founder of ImClone. Waksal is currently serving a 7-year prison term for insider trading.
They eventually centered their charges against Stewart around obstruction of justice, saying she interfered with their probe into her sale of ImClone stock.
Stewart has repeatedly said her sale of nearly 4,000 ImClone shares was triggered by a standing order to sell if they stock fell below $60. She sold the stock for $58 per share on Dec. 27, 2001. The next day, ImClone reported that health regulators had rejected a key drug application, triggering a massive sell-off in the stock.
Her lawyer on Monday said the securities fraud charge seeks to "criminalize Ms. Stewart's public declarations that she had not engaged in insider trading in making a personal stock sale." Securities fraud carried a sentence of up to 10 years.
Charges against Stewart say that by denying her guilt, Stewart misled stockholders in her own company about the seriousness of her legal troubles. Those stockholders, the government charges, then lost money on their holdings when the share price of Martha Stewart Living fell.
"By claiming that statements of innocence could possibly mislead investors in the face of a government investigation known to everyone, it ignores the basic requirements of the securities fraud statute itself," the motion said.
Stewart's former stockbroker at Merrill Lynch & Co (MER.N), Peter Bacanovic, has also been charged by federal prosecutors in the case.
Stewart resigned as chief executive of Martha Stewart Living shortly after the charges were announced.