- The Washington Times - Friday, January 6, 2006

NEW YORK (AP) — A federal appeals court yesterday upheld the conviction of celebrity homemaker Martha Stewart for lying to investigators about selling stock that plunged in price soon after her trade. Mrs. Stewart completed her sentence in the case last summer but pursued the appeal anyway.

The 2nd U.S. Circuit Court of Appeals in Manhattan issued a written ruling upholding the 2004 convictions of Mrs. Stewart and former stockbroker Peter Bacanovic for lying about why Mrs. Stewart sold nearly 4,000 shares of ImClone Systems Inc. stock in 2001.

The sale came just before the stock took a dive on a negative government report about the drug company.

The appeals court said that none of the numerous grounds upon which Mrs. Stewart and Mr. Bacanovic challenged their convictions provided a basis to disturb the jury’s verdict.

Mrs. Stewart, 64, and Mr. Bacanovic, 43, had claimed the verdict was tainted by prosecutorial misconduct, juror misconduct, extraneous influences on the jury and erroneous evidentiary rulings and jury instructions.

Mrs. Stewart served five months in prison and five months of home detention, finishing her sentence last summer. Mr. Bacanovic completed his five-month prison sentence last year as well.

Allyn Magrino, a spokeswoman for Martha Stewart Living Omnimedia Inc., said: “We are disappointed for Martha, but this does not affect her ability to continue to do everything she’s been doing for the company since coming home.”

Prosecutors declined to comment on yesterday’s ruling. A lawyer for Mr. Bacanovic did not immediately return a telephone message for comment.

Mrs. Stewart had sold her shares in ImClone Systems on Dec. 27, 2001, after learning from Mr. Bacanovic that ImClone Chief Executive Officer Samuel Waksal was selling all of his shares in the company. A day later, ImClone announced that the Food and Drug Administration had rejected its application to approve the cancer-treating drug Erbitux. When the stock market reopened, ImClone dropped about 18 percent in value.

Waksal later admitted selling his stock based on advance word of the FDA decision. He is serving seven years in prison for insider trading.

A six-week trial culminated in March 2004 when the jury convicted the pair of conspiracy, finding that Mrs. Stewart had lied to investigators when she said she did not recall if she and Mr. Bacanovic had spoken about Waksal on the day she sold her shares.

The jury also concluded she lied when she said she did not recall being told that any Waksal family members were selling their ImClone stock.

The jury found that Mr. Bacanovic made a false statement to the Securities and Exchange Commission about a conversation with Mrs. Stewart and that he committed perjury in testimony before the SEC.

Mr. Bacanovic and Mrs. Stewart were both given the option of staying out of prison while they appealed but both chose to serve their sentences instead.

In a 74-page ruling, the appeals court rejected arguments by lawyers for both defendants that they were prejudiced by language and evidence at their trial concerning insider trading, with which neither of them was charged.

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