Lawyers for Martha Stewart and her former stockbroker will try to persuade a federal judge Monday to throw out some of the charges at their stock-trading trial.
U.S. District Judge Miriam Goldman Cedarbaum will hear an hour of arguments - 20 minutes each for Stewart, broker Peter Bacanovic and prosecutors - on whether parts of the indictment in the case should be dismissed.
The judge appears particularly interested in whether she should strike the securities fraud count against Stewart, which accuses her of deceiving investors in her media conglomerate, Martha Stewart Living Omnimedia.
Cedarbaum referred to that charge Friday as "the most problematic" of the five counts each against Stewart and Bacanovic. She indicated it was highly unlikely she would dismiss all the counts.
Besides securities fraud, the remaining counts relate to whether Stewart and Bacanovic tried to cover up the true reason Stewart sold 3,928 shares of ImClone Systems stock on Dec. 27, 2001, just before it took a dive.
The government contends Bacanovic sent word to Stewart that ImClone founder Sam Waksal was frantically trying to sell his shares. The pair claim they had a standing agreement to unload the ImClone shares when the stock price hit $60.
The securities fraud count, which the judge herself has called "novel," refers to three statements Stewart and her lawyers made in June 2002 in which they insisted she sold because of the $60 agreement.
Prosecutors say that was a deliberate play to keep the stock price of MSLO high. Stewart owned nearly all of the voting shares in the company, and stood to lose $30 million for every dollar MSLO stock fell.
In a brief argument on the charge Friday, Cedarbaum pressed prosecutor Karen Patton Seymour to prove Stewart intended to defraud investors.
Seymour pointed to a speech Stewart gave at an investor conference on June 19, 2002 - an appearance she was not required to make - in which she tried to calm investor worries by claiming her ImClone sale was proper.
"She knew and she hoped investors would rely on her word," Seymour said. "She didn't just say it for no reason. She said it purposefully."
Stewart lawyer Robert Morvillo said Stewart was simply trying to clear her name against a rumor that eventually proved to be false - speculation that she had advance word that the government would reject an application to review ImClone's cancer drug.
The government never criminally accused Stewart of knowing about the report - only that Waksal was trying to sell.
