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Did Stewart’s Penchant for Perfection Rub Off on Staff?

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Times Staff Writer

The headline events in the Martha Stewart trial, entering its fourth week today, are being covered by media from around the world. Here’s some of what’s happening in the footnotes.

Perfect pairing? Stewart is so renowned a perfectionist that satirists joke about her harvesting the flax for her linens and painting highlights on the leaves of her trees.

Perhaps the trait rubs off. In testimony last week, Stewart’s personal assistant, Ann E. Armstrong, described sitting in shock at her computer two years ago after Stewart had deleted and typed over a potentially incriminating phone message from her stockbroker.

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The message originally read: “Peter Bacanovic thinks ImClone stock is going to start trading downward.” Stewart changed it to: “Peter Bacanovic re imclone.” But she reconsidered and quickly told Armstrong to “put it back the way it was,” the aide testified.

While Stewart made a phone call, Armstrong stared at the screen, knowing she was out of her depth legally, she said. But soon, temptation overcame her.

“I just reflexively neatened it,” Armstrong said.

“You mean, you capitalized ImClone?” asked U.S. District Court Judge Miriam Goldman Cedarbaum.

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“Yes,” Armstrong said. “I put in the colon, capitalized the I and the C.”

The finished product read: “Peter Bacanovic re: ImClone.” Even Stewart couldn’t fault the result -- if only it weren’t marked Government Exhibit 131.

Talk about a brushoff: At this trial, the battle isn’t just prosecution versus defense. Sometimes it’s charcoals versus pastels.

Court officers on Friday ejected veteran sketch artist Shirley Shepard from her seat in the gallery because of an earlier set-to with rival artist Christine Cornell.

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With no cameras allowed in federal courts, artists are the only source of pictures. They work fast and under pressure, frequently dashing from the courthouse to the media tent city across the street, where they offer fresh images to the TV cameras for cash. The competition is intense and not always good- humored.

A front-row bench in the gallery is reserved for artists, but it’s crowded. Some artists line up on the courthouse steps as early as 7 a.m. to secure a seat with a good angle on the defense table, judge and witness box.

Cornell had left the courtroom temporarily Wednesday afternoon and was attempting to return to her seat, but Shepard, sitting on the aisle, refused to let her in, according to spectators who witnessed the brief confrontation. Cornell returned a moment later with a court officer, who ordered Shepard to let Cornell pass.

Shepard’s punishment was the banishment meted out Friday. She took her pastels and easel to the “overflow” room down the hall, where the proceedings are shown on closed-circuit TV and the bar for decorum isn’t set so high.

Market maker: You could do worse than to invest like Martha Stewart.

Sure, in late 2001, a week before her controversial ImClone Systems Inc. sale, she was showing losses in 23 of the 36 stocks in her $2.5-million Merrill Lynch portfolio, according to trial exhibits. She was in the red at the time on such tech favorites as Amazon.com Inc., Doubleclick Inc., EMC Corp., JDS Uniphase Corp., Lucent Technologies Inc., Palm Inc. and Sycamore Networks Inc.

But, honestly, who didn’t lose money on Lucent? And unlike others involved in the tech stock boom, Stewart wasn’t chasing dot-coms with the milk money. Her 60% stake in her own company, Martha Stewart Living Omnimedia Inc., was worth more than $500 million.

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A glimpse of Stewart’s style as an investor surfaced last week with the release of edited tapes of Bacanovic’s Feb. 13, 2002, interview with Securities and Exchange Commission investigators.

Stewart had been described elsewhere in testimony as harsh, impatient and demanding. But in Bacanovic’s account, she also was disciplined and flexible enough to learn from her investing mistakes. Worried that she didn’t have time to analyze dozens of stocks, she repeatedly asked Bacanovic to help her chop the portfolio down to about 20 positions. Busy as she was, she phoned him about every two weeks to check on her stocks.

“She’s very loath to sell stock, ever, and has often watched good gains evaporate,” Bacanovic told the SEC.

For example, Bacanovic kept trying to get Stewart to sell the 40,000 shares of Kmart Corp. she had bought at $7.40 a share, but she held and held until finally selling at $5 as the company stumbled toward Bankruptcy Court.

“But I think even that, in hindsight, looks lovely,” Bacanovic said. “So, with that memory fresh in her mind, she was a little bit more predisposed to listen to me about the gains in ImClone and potentially selling the stock.”

The ImClone sale, of course, is the one that got Stewart indicted.

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