Witness Lied in Martha Stewart Trial, U.S. Charges

A key government expert who testified against Martha Stewart was charged Friday with lying on the witness stand, raising the possibility that Stewart’s criminal conviction could be thrown out.

In a two-count perjury complaint, federal prosecutors charged U.S. Secret Service forensics lab director Larry F. Stewart with lying about his involvement in the investigation of the lifestyles entrepreneur and her former stockbroker, Peter E. Bacanovic.

Defense attorneys vowed to seek a new trial. But the government insisted that the convictions were warranted, saying the accuracy of forensic tests done at the Secret Service lab were never in question, even though Larry Stewart may have exaggerated his role in conducting the tests.

“We are quite confident that the false testimony will have no impact on the convictions,” said David Kelley, the U.S. attorney in Manhattan.

Legal experts said the alleged dishonesty was extremely serious, however, and some said it raised a strong possibility that the convictions could be reversed.

“If not the trial judge then the Court of Appeals will look very skeptically at the idea of letting the conviction stand,” said Richard Beckler, a partner at Howrey Simon Arnold & White.

In any case, the disclosure that a federal official may have lied in a trial in which defendants were convicted of lying was a stinging blow to the authorities.

“The Martha Stewart case was such a significant prosecution for the government, and to have this kind of alleged government activity is extraordinarily disturbing,” said Mark Biros, a white-collar defense lawyer at Proskauer Rose in Washington.

In a statement, Robert G. Morvillo and John J. Tigue, lawyers for Martha Stewart, said the lab director’s arrest “clearly demonstrates that the trial of Martha Stewart was fatally flawed and unfair.”

The executive was convicted in March of conspiracy, obstruction of justice and two counts of lying to investigators to cover up a stock sale she made after getting a tip from a friend. Bacanovic was convicted of conspiracy, perjury, obstruction and lying to investigators. He was acquitted of making a false document.

The testimony of Larry Stewart, who is not related to Martha Stewart, was central to a key piece of evidence at the trial -- a worksheet on which Bacanovic had scribbled “@60.” The defendants claimed the notation was proof that Stewart and her broker had had a preexisting agreement to sell the stock, ImClone Systems Inc., after its price fell below $60.

Prosecutors countered that Martha Stewart sold because she had been tipped off about news that would hurt the company, and that Bacanovic added the notation after the government began an insider trading investigation. The tests showed that the ink used to write “@60” was different from other ink on the worksheet.

Ultimately, however, the charge directly related to that testimony -- that Bacanovic had falsely altered the document -- was the one felony count of which he was acquitted. Stewart was not accused of that charge.

In deciding whether the convictions should stand, U.S. District Judge Miriam Goldman Cedarbaum will have to conclude whether the jury would have found the defendants guilty without Larry Stewart’s testimony, attorneys said.

“The judge could go either way on that question,” said Rick Robinson, a partner at Fulbright & Jaworski in Washington who is not involved in the case.

In its 15-page complaint Friday, the government alleged that Larry Stewart lied by portraying himself as deeply involved in the ink tests when he did no actual work on them. In fact, the complaint said, he learned of the first test only after it was completed. He was briefly consulted on the second test.

At a court appearance Friday, the 46-year-old lab director was released on $50,000 bail and a preliminary hearing was set for June 10, Associated Press reported. He did not enter a plea and could face up to 10 years in prison if convicted of the two counts.

His attorney, Lawrence Feld, could not be reached for comment.

At the trial, the bookish Stewart described himself as one of the world’s leading handwriting scientists.

“I’m also the national expert for ink, of all things,” he testified.

Displaying a degree of confidence that bordered on arrogance, Stewart sparred for more than an hour with Richard M. Strassberg, Bacanovic’s lead defense lawyer, during cross examination. Stewart frequently quibbled with Strassberg’s questions, correcting him on the minutiae of scientific ink testing.

At one point, Strassberg asked: “Mr. Stewart, ... You are aware of the ASTM standards about ink analysis, right?”

“I wrote them,” Stewart replied to laughter from the gallery.

Lawyers for Martha Stewart and Bacanovic are expected to file for a retrial as early as next week.

“We believe that the perjury of a key government witness undermines any integrity there was in the jury’s verdict, and we will request a new trial,” Strassberg said through a spokesman.

Judge Cedarbaum previously rejected a petition for a retrial on grounds that one juror had lied on his jury questionnaire.