- The Washington Times - Sunday, March 7, 2004

NEW YORK (AP) — Facing a stock scandal that threatened to shatter Martha Stewart’s carefully tended reputation and enormous fortune, her defense team made three high-stakes gambles: They let the case go to trial, kept Stewart off the witness stand and put on a defense that took less time than one of her syndicated cooking shows.

The perfectionist homemaker wound up with the most crushing loss possible — a guilty verdict on all counts, and a likely new home behind bars.

“She should get her money back from her lawyers,” said Thomas Ajamie, a veteran Houston securities lawyer. “How this even went to trial in the first place, I have no idea.”

Stewart should have admitted from the beginning that she sold her ImClone Systems stock in 2001, based on a tip that ImClone CEO Sam Waksal was selling his shares, Mr. Ajamie said.

However, Stewart made no mention of the tip in a Feb. 4, 2002, interview with investigators, and she said in a follow-up interview two months later that she had no memory of knowing in advance that Waksal was selling.

Legal experts said Stewart might have avoided prison if she had come clean then because the money at stake in the trade was so small. Stewart, who was briefly a billionaire after Martha Stewart Living Omnimedia went public in 1999, saved $51,000 by selling a day ahead of a damaging government report about an ImClone drug.

“Had she admitted the mistake early on, she would have spent no time in prison,” said Mr. Ajamie, who was careful to point out he was speaking in hindsight. “She’s much worse off than had she tried to go in and just admit the mistake.”

Her lawyers insisted Stewart was telling the truth when she said she did not recall receiving the tip that Waksal was selling ImClone shares — a tip they have conceded she did receive.

By the spring of 2003, with a grand jury nearing an indictment of Stewart and broker Peter Bacanovic, federal prosecutors were insisting on prison time in any plea deal with Stewart, people close to the case have said.

At trial, Stewart lawyer Robert Morvillo called just one witness, a lawyer who attended the Feb. 4 interview, in hopes of casting doubt on the government’s version of exactly what questions Stewart was asked. The defense questioned him for just 20 minutes.

But Mr. Morvillo, who is considered among the best white-collar criminal defense lawyers in the country, kept Stewart off the stand. He was betting that jurors would decide the defense had undermined the prosecution’s case, which included nearly two dozen witnesses.

Instead, jurors convicted Stewart on all four counts — conspiracy, obstruction of justice and two counts of lying to investigators.

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