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Martha trial enters final phase
Securities fraud charges dismissed, but Stewart still faces charges for obstruction of justice.
March 1, 2004: 7:33 AM EST

NEW YORK (CNN/Money) - The Martha Stewart trial enters its final phase Monday with the prosecutors and defense attorneys set to begin their closing arguments.

On Friday, U.S. District Judge Miriam Goldman Cedarbaum dismissed the securities fraud charge levied against the 62 year-old lifestyle expert, saying that "the evidence and inferences the government presents are simply too weak to support a finding beyond a reasonable doubt of criminal intent."

In the dropped charge Stewart was accused of using her own statements that she was innocent as a ploy to mislead investors in her company, Martha Stewart Living Omnimedia (MSO: Research, Estimates). MSO stock started sinking last spring after questions about Stewart's sale of ImClone shares surfaced.

Securities fraud was the most serious charge against Stewart, carrying a penalty of up to 10 years in prison.

Stewart and her co-defendant and former stockbroker, Peter Bacanovic, still face obstruction of justice charges involving their statements to investigators after Stewart sold nearly 4,000 shares of ImClone Systems (IMCL: Research, Estimates) stock on Dec. 27, 2001, the day before bad news about the biotech firm's key drug sent the stock plunging.

Related Links
Opinion (U.S. v. Stewart and Bacanovic)
Superseding Indictment (U.S. v. Stewart and Bacanovic)
Court Ruling Dismissing 'Selective Prosecution' Defense
Stewart's Employment Agreement at Martha Stewart Living Omnimedia Inc.

Bacanovic was broker to both Stewart and ImClone founder Sam Waksal, whose family was also selling shares that day.

Stewart and Bacanovic told investigators that Stewart's sale of nearly 4,000 shares was due to an arrangement to sell once shares fell to $60, but Bacanovic's former assistant testified that the broker told him to alert Stewart to Waksal's sale.

Waksal is serving a seven-year prison term after pleading guilty to securities fraud over his family's sale of the ImClone shares.

Ironically, Erbitux, the ImClone drug that led to the insider trading scandal when its application was rejected, was recently approved to treat certain forms of cancer.

Martha Stewart
Peter Bacanovic
ImClone Systems Incorporated
Corporate Scandals

Neither Stewart nor Bacanovic testified at the trial -- the most closely watched case so far involving corporate executives accused of wrongdoing.

The defense rested its case Wednesday, and there was no action Thursday.

Meanwhile, prosecutors and defense lawyers met privately with Judge Cedarbaum earlier Friday to discuss the instructions she will give to the jury when she gives them the case later this week.

Those instructions are themselves a matter of contention between the two sides because of how they can shape the jury's debate.  Top of page

-- from CNNfn's Allan Chernoff and staff and wire reports

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