Martha Trial: Recipe For Disaster

Attorney Andrew Cohen analyzes legal issues for CBS News and CBSNews.com.

Not only that, the prosecution's narrative lacks virtually all of the elements people have come to expect from a high-profile trial. There is no victim. There is no villain. There is no hero. There is no blood. There is no monster in the dock. There is no overriding sense that an injustice will be done if there is an acquittal.

Instead, there is a young, fresh-faced former stockbroker and his older, puffy-faced former client. There is a young man who fell into a wildly successful business relationship with one of the nation's most wildly successful businesswomen. There is Peter Bacanovic, who finally convinced his client Martha Stewart to sell her last remaining ImClone stock much to the detriment of both.

And there is Stewart herself, in the eye of the storm, who authorized the sale of the wrong stock at the wrong time during the wrong Administration. On the sliding scale of dangerous criminal conspiracies, Bacanovic and Stewart don't exactly bring to mind Timothy McVeigh and Terry Nichols -- or even John Muhammad and Lee Malvo.

If Tuesday's opening statements suggest anything relevant about the rest of the trial they suggest that the government will have a difficult time painting Stewart or Bacanovic as worthy of prosecution, much less conviction and prison.

Stewart has been charged with obstructing an investigation into insider trading -- one that did not lead to insider trading charges against her -- and with securities fraud. Bacanovic is charged with conspiracy and obstruction. Both defendants should have known better than to behave as they did at the end of 2001 and the beginning of 2002. But it's hard to see how they committed a crime back then or why a jury would say so now.

I'm no securities law expert, but something tells me that many investors around the country do every day what Stewart is accused of doing on Dec. 27, 2001, which is selling her stock on the advice of her broker.

Prosecutors allege Stewart improperly sold her ImClone stock after Bacanovic's assistant, Doug Faneuil, told her the shares were being dumped that day by ImClone founder Sam Waksal and his family. The feds say that Bacanovic told Faneuil to advise Stewart to sell the stock for that reason. And the government says that Bacanovic and Stewart then compounded their crimes by lying to investigators when the suspicious trading activity gained the notice of the Securities and Exchange Commission and, later, the FBI and the Department of Justice.

Lead prosecutor Karen Patton Seymour told jurors Tuesday the case against the defendants is a case about "obstructing ... lying to federal agents ... perjury ... cheating investors ... and a cover-up." But it's hard to find much "there" there. There is some physical evidence that prosecutors say link Stewart and Bacanovic to each other and to criminal conduct. For example, the feds say that Bacanovic altered a computer spreadsheet and that Stewart, temporarily anyway, deleted an e-mail then instructed her assistant to restore its contents.

The government's case, however, rests squarely upon the shoulders of Faneuil, whose anticipated testimony against his former boss and client will likely make the trial as much about his credibility as it is about the credibility of either of the two defendants.

Which is where the Bacanovic defense comes in. The former broker's attorney, Richard Strassberg, told jurors that Faneuil was in no position to know anything about what Stewart and Bacanovic may have talked about before Dec. 27, 2001. Faneuil was immaturely fixated on Stewart, Strassberg told the jury, and if anyone passed along information about Waksal to Stewart, it was Faneuil.

It was Faneuil who initially lied to investigators, the defense contends, and it is Faneuil today who has an incentive to make prosecutors happy by delivering unto them a Stewart conviction. In exchange for his favorable testimony, Team Bacanovic argues, Faneuil was permitted to plead guilty to a misdemeanor instead of a felony.

The defense wants you to believe that Faneuil is a dirty lowdown rat who is trying to save his skin at the expense of his former boss.

Stewart's defense is a little less subtle but no less impressive. Attorney Robert Morvillo told jurors that Stewart's sale of stock that day was the last in a series of documented moves designed to create tax losses which could be offset against capital gains she had made that year thanks to the sale of her own stock. Rather than being part of a grand conspiracy, Stewart's lawyer says, the sale was the culmination of a months-long effort by Bacanovic to rid Stewart of a stock he thought was a dog.

The feds wrongly thought Stewart had been tipped off by Waksal, Morvillo told the jury, and when that hunch went nowhere they bootstrapped a few lame other charges against her in order to take her to trial. There is no motive for a crime, the Stewart defense asserts, and there was no opportunity for the two alleged conspirators to come up with a plan.

So where is the villain? The only villains I can see are either in jail (Waksal) or perhaps on their way there post-trial.

Where is the hero? There is no hero in this story. Even Seymour called her star witness an "admitted criminal."

Where is the victim? The only victims I can see are sitting at the defense table. Stewart already has lost a fortune and might lose a whole lot more. Bacanovic lost his job and his reputation. ImClone shareholders who didn't get a call that day from Bacanovic? Well, hundreds, maybe thousands of them sold their ImClone shares anyway on Dec. 27, 2001. According to the defense, the Stewart and Waksal shares sold back then represented only a tiny fraction of the company's trading volume that day. Should Stewart and Bacanovic be on the hook to everyone else?

And what about shareholders of Stewart's publicly traded company? Were they victimized, as the government posits, by Stewart's public statements in her own defense? If so, wouldn't they have lost more money had Stewart simply abandoned ship a few years ago and trudged off to jail, guilty or not? And if not, why exactly is it considered "fraud" when a company's executive tries to fight back in the court of public opinion? Can you imagine how such a charge, if it sticks against Stewart, would chill public comment about corporate activities? Can you imagine what a cudgel that would create for prosecutors in any case involving a public figure deemed to have a fiduciary duty to others?

Those are just some of the questions the government might want to consider trying to answer before it asks jurors to deliberate the fate of Stewart and Bacanovic. Want some others? Why would Bacanovic risk all for a lousy $450 trading commission on the sale in question? Why would Stewart risk everything to sell a few thousand shares of stock in a company of which she already had largely divested herself? Why should jurors believe that Faneuil is telling the truth now when they know that he didn't initially tell the truth to anyone about anything? If they truly were scheming with each other, why didn't Stewart and Bacanovic come up with a better story? Aren't brokers supposed to keep their best clients apprised of market movements? And, perhaps most relevant of all, as Morvillo asked during his entertaining opening: What would you have done if you had been on the other end of that telephone call that day? Wouldn't you have sold the stock?

It's just day one. But the government already has succeeded in doing something few Americans ever could have believed possible. The feds have made Martha Stewart seem like an underdog. That's impressive. But it's hardly a recipe for success in a criminal trial.