Martha Stewart conspired two years ago with her stockbroker to unload nearly $250,000 in stock before its price tanked, and then lied about it, a federal prosecutor said Tuesday in presenting the government’s case against the lifestyle queen.
But Stewart’s attorney, Robert Morvillo, portrayed his client as a conscientious, hardworking chief executive engrossed in many financial decisions related both to her business and herself. Stewart, Morvillo told a packed federal courtroom in Lower Manhattan, had neither the time nor the interest in conspiring with Merrill Lynch & Co. stockbroker Peter Bacanovic, a co-defendant in the case.
Rather, he said, government prosecutors struck a deal with Bacanovic’s assistant, Doug Faneuil, already convicted for lying to federal officials, to make an example of Stewart, 62.
A jury of eight women and four men listened to three hours of opening statements that presented markedly different portrayals of Stewart’s sale of nearly 4,000 shares in the biotechnology company ImClone Systems on Dec. 27, 2001.
Morvillo used passion, humor and a booming voice to punctuate his argument that Stewart should be declared innocent of the government’s charges of perjury, securities fraud and obstruction of justice. If convicted of all charges, Stewart faces a prison term of up to 30 years.
“That she was trying to commit insider trading, that that was her motive, is just not true,” Morvillo said. “In this trial, there will be no direct evidence from the government that Martha Stewart attempted to obstruct anything.”
At issue are the events of Dec. 27, 2001, when Stewart spoke to Faneuil while waiting at a San Antonio airport.
According to U.S. attorney Karen Patton Seymour, Stewart, who was on her way to a vacation in Mexico, received a “secret tip” from Faneuil that her friend Sam Waksal, the founder of ImClone, was selling tens of thousands of his company’s shares. Speaking by cell phone, Faneuil allegedly said Waksal had just learned the Food and Drug Administration was about to issue a negative report on the company’s only drug, a cancer treatment called Erbitux.
Eager to reap some gains in a year marked mostly by stock market losses, Stewart told Faneuil to sell her ImClone shares, Seymour said. The nearly $250,000 sale saved Stewart $45,673. Bacanovic, his lawyer said, made $450 on the sale.
In the ensuing months, Seymour argued, Stewart and Bacanovic created an alibi that they had agreed to consider selling ImClone once it fell below $60 a share.
Rather than admit she had received a tip from Faneuil, Stewart chose to conspire with Bacanovic, who in turn pressured Faneuil to support the story of a pre-existing agreement to sell her ImClone stock, she said.
Yet Morvillo said that on that December afternoon, Stewart was in the midst of handling numerous projects. Morvillo also said Stewart was far more concerned with the impending sale of stock in her own company, Martha Stewart Living Omnimedia, a sale that would eventually net her $45 million.
A sudden spike in ImClone’s trading volume, however, caused in large part by Waksal’s attempt to unload his shares, prompted Stewart to tell Faneuil to sell her ImClone stock, Morvillo said.
Making it clear where the defense plans to attack the government’s case, Bacanovic’s lawyer Richard Strassberg charged that Fanueil, who has already admitted to lying to federal investigators, fabricated the story about being pressured by Bacanovic in a deal with federal prosecutors.