Stewart's denial of guilt cited as crime
| • | Martha fans keep faith in business |
By Erin McClam
Associated Press
NEW YORK — Prosecutors tucked a highly unusual twist into their indictment of Martha Stewart — a charge that she committed a crime simply by declaring her own innocence.
Prosecutors say the domestic guru committed securities fraud — that is, she deliberately tried to inflate the stock of her own company — when she stood up in public last summer and denied engaging in insider trading.
"There's kind of a natural tendency when you're confronted with something to deny it," said Richard A. Serafini, a former economic crimes prosecutor in New York. "Now they're charging it as market manipulation."
Legal experts said the charge is a high-risk move designed to convince a jury that Stewart hurt thousands of ordinary stockholders in Martha Stewart Living Omnimedia.
Stewart was indicted Wednesday on five federal counts — including obstruction of justice, conspiracy and lying to investigators — tied to her December 2001 sale of nearly 4,000 shares of ImClone Systems stock. She pleaded not guilty to all charges, but could go to prison for several years if convicted.
Her former stockbroker, Peter Bacanovic, also was indicted and pleaded innocent.
Stewart dumped her ImClone stock one day before the government issued discouraging news about an ImClone cancer drug. The government says Stewart had inside knowledge that the stock was about to plummet.
But it was the charge of securities fraud that surprised legal observers. The charge cited a speech Stewart gave at an investors conference in New York last June 19, a week after ImClone founder Samuel Waksal, a longtime friend, was arrested on fraud charges.
In the speech, Stewart maintained that her sale of ImClone shares was perfectly legal and said she was cooperating "fully and to the best of my ability with investigators."
Prosecutors say those were lies designed to pump up the stock price of her company. Martha Stewart Living Omnimedia rose more than $2, or about 14 percent, to $16.45 after her speech. The stock now trades at about $10.
"What the government is trying to suggest here is that this was not a victimless crime," Robert Mintz, a former federal prosecutor, said Thursday.
