Stewart attorney tries to head off fraud charge

NEW YORK -- Martha Stewart's attorney showed jurors a slew of two-year-old news reports Wednesday that speculated she sold ImClone Systems stock on insider information and even was romantically linked to its now-jailed CEO.

The defense introduced the material to show that Stewart was simply trying to discredit inaccurate reports, and making smart business decisions, in the summer of 2002 when she issued statements saying her ImClone sale was proper.

Stewart was never charged with criminal insider trading, and she has denied having any romantic relationship with ImClone founder Sam Waksal.

The government accuses Stewart of illegally trying to prop up the stock price of Martha Stewart Living Omnimedia -- and therefore save her tremendous wealth -- when she publicly proclaimed her innocence in the Imclone case.

That charge, securities fraud, carries a potential 10-year prison term. Four other counts against Stewart accuse her, in various ways, of lying to investigators about why she sold ImClone stock.

The government claims she unloaded her stock because broker Peter Bacanovic sent word to her through an assistant on Dec. 27, 2001, that Waksal was trying to dump his shares.

The news reports, introduced by Stewart attorney Robert Morvillo, are from early June 2002, when word leaked that Congress was investigating whether Stewart sold ImClone on insider information.

In one, a Minnesota Public Radio anchor refers to a purported romantic link between Stewart and Waksal and says: "It looks like Martha Stewart may have kissed and sold." In another, Rep. James Greenwood, R-Pa., says Stewart's ImClone sale "raises the specter of insider trading."

Also Wednesday, a federal appeals court ruled that the judge overseeing the trial was wrong to bar the media from jury selection.

U.S. District Judge Miriam Goldman Cedarbaum said she kept reporters out because she was worried prospective jurors might be less candid if they knew reporters were watching.

But the 2nd U.S. Circuit Court of Appeals called the media "a vital means to open justice" and said the judge had not met the heavy burden required to close jury selection, which is usually open to the media.

The ruling came too late to make a difference in the Stewart trial, which began last month. But the appeals court said the issues would probably arise in other trials and were too important to overlook.