Stewart Asks Judge to Void Her Conviction

Martha Stewart asked for a new trial Thursday, saying her March 5 conviction was tainted by a witness’ lies.

Court papers filed by Stewart’s lawyers contend that testimony by a Secret Service lab director who was indicted this week on perjury charges was “the capstone” of the government’s effort to show that Stewart and her former stockbroker, Peter E. Bacanovic, lied to cover up the circumstances of her sale of stock in a biotechnology company.

“Simply stated, a verdict that rests upon such a corroded foundation cannot stand,” Stewart’s lead lawyer, Robert G. Morvillo, said in the motion for a new trial.

Judge Miriam Goldman Cedarbaum earlier this week postponed sentencing for three weeks, to July 8, to give herself time to consider the motion, which the defense had said it would file. Stewart, 62, and Bacanovic, 42, each face an estimated 10 to 16 months in prison for their convictions on felony counts of conspiracy, obstruction of justice and lying to the government.

Prosecutors contend that while lab director Larry F. Stewart (no relation to Martha Stewart) lied under oath, the underlying evidence was sound and the convictions should stand.

A federal grand jury indicted him Wednesday on two counts of perjury stemming from his testimony during the six-week trial.

Legal experts are divided on the strength of the new-trial motion, but several attorneys said perjury by a government witness did pose a credible challenge to the conviction. A key question is whether prosecutors knew or should have known about the alleged perjury when it happened.

If the defense can establish such government negligence, it will considerably lower the legal bar it must clear to win a new trial, said Mark C. Zauderer, a business-litigation specialist with Piper Rudnick in New York.

Without a negligence finding, the defense would have to show that Stewart and Bacanovic most likely would not have been convicted without the alleged perjury, Zauderer said. But if negligence is found, he said, the defense need only show “any reasonable likelihood” that the false testimony could have affected the jury’s judgment.

Neither the prosecution nor the Secret Service had any comment Thursday on the new-trial motions.

The lab chief, an expert on ink analysis, testified about a brokerage worksheet listing Martha Stewart’s stock holdings on which Bacanovic had jotted “@60” next to the symbol for ImClone Systems Inc. Larry Stewart said the “@60” notation was in a different ink than the other handwriting on the sheet.

The government was trying to show that Bacanovic had added the notation to support his and his client’s allegedly phony story that they had an agreement to sell her ImClone stock when its price fell below $60.

Prosecutors said Stewart sold because she had a tip that ImClone insiders were dumping their shares.

A day after her sale came bad regulatory news that pummeled ImClone’s stock.

In the indictment, Larry Stewart is accused of repeatedly lying about his personal involvement in the chemical testing of the worksheet. Although he said he personally participated in the testing, the tests actually were done by a subordinate and were overseen and approved by another supervisor, the indictment states.

Defense lawyers said they don’t contend that the prosecutors were aware of the false statements during the trial but rather that they should have been.

Richard M. Strassberg, Bacanovic’s lead attorney, noted in his new-trial motion, also filed Thursday, that prosecutors ignored “numerous red flags” that should have made them wary of the lab director’s testimony. For example, Larry Stewart’s name wasn’t present on the key lab report summarizing the ink analysis nor on any of the supporting documents.

Strassberg added, based on information the government recently turned over to the defense, that Larry Stewart has been banned for many years from testifying in Canada, “apparently for overstating evidence in a case.”

The ban “should have put the prosecution on notice of potential problems with Mr. Stewart as a witness,” Strassberg wrote.

“Obviously, the government now wants to distance itself from Mr. Stewart, but there can be no question that throughout the actual prosecution, Mr. Stewart was an integral and active member of the prosecution team,” Strassberg wrote. “His perjury was the government’s perjury.”

Cedarbaum already has rejected one new-trial motion by Stewart and Bacanovic, who argued that a juror had lied during pretrial questioning by failing to mention a prior arrest on assault charges.

The judge ruled it was unclear that the defense would have kept the juror off the panel had they known about his legal scrapes.