Martha Wants Indictment Trimmed

Style maven Martha Stewart asked a federal judge Monday to toss out part of the stock-trading indictment against her and said the government case violates her First Amendment rights.

Stewart, in papers filed in Manhattan federal court, asked the judge to dismiss charges of securities fraud and obstruction of justice — two of the five counts against the former TV show host who founded Martha Stewart Living Omnimedia.

The indictment accuses Stewart of selling shares of ImClone Systems Inc. stock on Dec. 27, 2001, because she had been illegally tipped that the family of ImClone founder Sam Waksal was planning to sell shares, and then lying about it.

The sale came just before ImClone stock plummeted on a negative government report about the company's cancer drug Erbitux. Stewart and stockbroker Peter Bacanovic, who was indicted with her June 4, have pleaded innocent.

The securities fraud count alleges Stewart deliberately deceived shareholders in her company, Martha Stewart Living Omnimedia, when she declared in 2002 that she was innocent and was cooperating with investigators.

"This charge is unprecedented in the 70-year history of the federal securities laws," Stewart's lawyers, Robert Morvillo and John Tigue, said in a statement.

Her lawyers claim the count should be dismissed because it violates her constitutional rights and the American legal principle that defendants are innocent until proven guilty.

"By criminalizing speech by a woman defending her reputation, speaking out against false congressional allegations and asserting her innocence, it violates the First Amendment," which guarantees the freedom of speech, said the 122-page filing.

The lawyers said in court papers the obstruction count should be dismissed because none of Stewart's statements to investigators could have hindered an investigation by regulators into her stock sale.

"Count Eight, called "obstruction of justice" by the prosecution, must be dismissed because none of Ms. Stewart's statements could have hindered the SEC investigation and the Indictment does not adequately allege that she was even aware of the SEC investigation when the statements were made," her lawyers said.

While securities regulators filed a civil suit charging Stewart with insider trading, the government did not include the charge in its indictment. The charge is much more difficult to prove in a criminal case.

Stewart's lawyers also object to a section of the indictment that the government labeled "background" but that the lawyers contend is really inflammatory language that could mislead a jury.

"It is inflammatory, irrelevant, and insinuates that Martha Stewart committed insider trading when there is no insider-trading charge in the indictment," the lawyers said.

The five federal counts in the indictment carry a total sentence of 30 years in prison and fines of $2 million. The two counts Stewart wants dismissed account for 15 years and $1.25 million. Under federal sentencing guidelines, Stewart would likely face far less time in prison if convicted.

The government has until Nov. 5 to respond to the filing. A spokesman for federal prosecutors, Michael Kulstad, said he had no comment.

Arguments before U.S. District Judge Miriam Goldman Cedarbaum are set for Nov. 18. Stewart and Bacanovic are to go to trial Jan. 12.