Martha's Legal Team Files Appeal

So Have Her Former Stockbroker's Attorneys

(CBS/AP)  Lawyers for Martha Stewart have told a federal appeals court that she suffered an unfair trial at the hands of prosecutors who incorrectly suggested she was accused of insider trading, and asked an appeals court in New York to overturn her conviction for lying to federal investigators about a 2001 stock sale.

Her former stockbroker also asked a federal appeals court Wednesday to overturn his conviction, arguing "toxic" evidence against the celebrity homemaker hurt his own right to a fair trial.

Stewart was never charged with insider trading — only with deceiving investigators. But the appeals brief, which was made public Thursday, argues prosecutors and the trial judge kept the jury from understanding the difference.

Lawyers for Peter Bacanovic also told the 2nd U.S. Circuit Court of Appeals that the judge who oversaw the trial unfairly restricted his right to question witnesses and gave the jury misleading instructions.

"Bacanovic's trial alongside Martha Stewart was one of the most highly publicized criminal cases in recent memory, but it was not a fair trial for Bacanovic," his lawyers wrote in a 93-page brief.

Bacanovic was convicted of conspiring with Stewart to lie to investigators about why Stewart sold 3,928 shares of ImClone Systems Inc. stock in 2001. Both were sentenced to five months in prison and five months of house arrest.

Both were allowed to stay out of prison while they appealed. Stewart decided to report earlier this month to a West Virginia prison, but the former Merrill Lynch & Co. stockbroker remains free on bail.

"It's important for her to have a final positive outcome to her odyssey through the legal system," Martin Weinberg, her attorney, said Thursday on CBS News' The Early Show. "We feel the judges in the second circuit in New York will not be affected by her decision to begin serving her sentence but, instead, be affected by the nature of the issues that are being raised on her behalf."

Stewart was convicted March 5 of lying about why she sold shares of ImClone Systems stock on December, 27th, 2001, the day before a negative announcement about the company that sent the price plunging.

Lawyers for Bacanovic argued to the appeals court that Judge Miriam Goldman Cedarbaum erred when she denied Bacanovic's request to be tried separately from Stewart.

Among other things, they argued that some testimony designed to implicate Stewart also unfairly prejudiced the jury against him.

They complained particularly about the testimony of Mariana Pasternak, a longtime Stewart friend who testified Stewart said to her on a resort vacation: "Isn't it nice to have brokers who tell you these things?"

Bacanovic was accused by federal prosecutors of passing a tip through his assistant to Stewart on Dec. 27, 2001, that ImClone founder Sam Waksal was selling his ImClone shares. She sold her shares later that day.

Prison is not a problem for Stewart, Weinberg told Early Show co-anchor Hannah Storm.

"She's staying strong and staying disciplined," the attorney said after meeting with Stewart over the weekend. "She's positive, she's optimistic. She's trying to put the best face on what is a difficult situation."

However, although she's been visited by her daughter and attorneys and gets 300 minutes of telephone calls a month, just like any other inmate, Weinberg said prison is no summer camp.

"Nobody should trivialize the experience that she, like 2.1 million others, experience when their freedom is restricted, when their privacy is restricted," he said. "There is an enormous change in ... what's occurred to her life over the last three weeks."