- The Washington Times - Wednesday, March 3, 2004

NEW YORK — The Martha Stewart jury began its deliberations yesterday, wrestling with the question of whether she lied about a stock sale — and likely holding her reputation as an icon of gracious living in its hands.

The jury made requests twice in its first few hours to review voluminous evidence from the trial, including segments of the testimony of Douglas Faneuil, the government’s star witness.

But jurors ended the day without reaching a verdict. Their deliberations were to resume this morning.

Mrs. Stewart and broker Peter Bacanovic are accused of lying to investigators about why Mrs. Stewart sold 3,928 shares of ImClone Systems stock Dec. 27, 2001 — just before it plunged on a negative government report.

The pair said they had struck a deal earlier to get rid of Mrs. Stewart’s shares when the stock fell to $60. The supposed deal is the cornerstone of the defense.

Mrs. Stewart’s attorney has conceded Mrs. Stewart was told Dec. 27 that Mr. Waksal was trying to sell his shares. But he insists she was being accurate when she told investigators that she did not recall such a tip.

In a note to the judge, jurors asked to review what Mr. Faneuil testified about conversations he had with Mrs. Stewart and Mr. Bacanovic on Dec. 27. Mr. Faneuil said he was ordered by Mr. Bacanovic to tip Mrs. Stewart about the Waksal sale.

Prosecutors and defense lawyers spent much of the afternoon reviewing stacks of transcripts from the trial, trying to determine exactly what testimony to send to the jury.

In a second note later in the day, jurors asked for several pieces of evidence, including what the government said is a doctored worksheet that Mr. Bacanovic used to make the $60 story appear legitimate.

Specifically, the jury also asked to hear more evidence about a Jan. 7, 2002, interview with the Securities and Exchange Commission in which Mr. Bacanovic told investigators he personally handled Mrs. Stewart’s ImClone trade.

Mr. Faneuil actually handled the sale, and Mr. Bacanovic’s mistaken claim is one element of a charge of false statements against the former broker.

The panel of eight women and four men had retired to a jury room at about 11:40 a.m., after 90 minutes of instructions from the judge on the legal requirements the government must meet for a conviction.

“You will now decide where the truth lies,” U.S. District Judge Miriam Goldman Cedarbaum told the jury.

The combined charges against Mrs. Stewart carry a penalty of up to 20 years in prison. If convicted on any charge, she also would be required to step down as chief creative officer of her media company, Martha Stewart Living Omnimedia.

The judge dismissed six alternate jurors who had heard the entire case, but instructed them not to talk about the trial because they could be called back if a juror could not continue.

Mrs. Stewart is charged with conspiracy, obstruction of justice and two counts of making false statements.

Mr. Bacanovic is charged with one count of making false statements, making and using false documents, conspiracy, perjury and obstruction of justice — charges that carry a prison term of up to 25 years.

The overlapping conspiracy count accuses Mrs. Stewart and Mr. Bacanovic of working together to devise the $60 agreement as a cover story to mislead investigators.

Under federal guidelines, the sentence for either defendant could be sharply reduced, even to less than a year, if convicted.

Much as she has throughout the six-week trial, Mrs. Stewart sat expressionless at the defendant’s table yesterday, sometimes resting her chin on her hand.

Judge Cedarbaum read to the jury a complex set of instructions on the counts in the indictment. Each count carries three or four specific requirements the government must meet to convict.

For example, Mrs. Stewart is charged with obstructing the SEC, which interviewed her Feb. 4 and April 10, 2002.

To meet that charge, jurors must find that Mrs. Stewart knew there was an SEC inquiry, that she knew her interview was related to the inquiry and that she wrongly tried to “influence, obstruct or impede” the investigation.

Earlier in the trial, Judge Cedarbaum dismissed a count of securities fraud that accused Mrs. Stewart of deceiving Martha Stewart Living Omnimedia investors by insisting she sold because of the $60 agreement.

The company includes magazines, TV programs, Web sites and an array of homemaking products. Mrs. Stewart stepped down as CEO after she was indicted last summer, but she has remained as chief creative officer.

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