Prosecutor: Martha Lied

Martha Stewart arrives at a federal courthouse in New York for her security fraud trial, Tuesday, Jan. 27, 2004. Opening statements were scheduled to begin Tuesday morning.
Martha Stewart lied to investigators and committed "serious federal crimes" by selling off nearly 4,000 shares of stock based on a tip no one else had, a prosecutor charged Tuesday.

As opening statements got under way in federal court, Assistant U.S. Attorney Karen Patton Seymour told jurors that Stewart had lied to federal agents, and "multiplied that lie by feeding it to investors in her own company."

"She was told a secret that no other investor had," Seymour said.

One count accused Stewart of deliberately trying to prop up the stock of her domestic lifestyle company, Martha Stewart Living Omnimedia, by saying in 2002 that she had done nothing wrong and was cooperating with investigators.

"She tried to mislead investors ... to lift that dark cloud hanging over her reputation," Seymour said. "Martha Stewart was worried this would be bad for her reputation."

But Stewart's attorney, Robert Morvillo, said the case against his celebrity client was circumstantial at best.

The prosecution was based on "speculation, surmise and guesswork," Morvillo said in his opening statement. "And they will ask you to ignore the lack of direct evidence."

Among those in the first-floor courtroom for the start of the trial were Stewart's daughter, Alexis, and her mother, Martha Kostyra.

The government claims Stewart was tipped that ImClone founder Sam Waksal was trying to dump his own shares in his company. Stewart and the broker, Peter Bacanovic, who is Stewart's co-defendant, say they had a pre-existing agreement to sell ImClone stock when it fell to $60 per share.

"Prosecutors have to explain why a multi-millionaire like Stewart would have done something designed to save her a relative pittance," said Legal Analyst Andrew Cohen. "The defense has to focus on a lack of direct proof that the sale of the stock was part of a criminal scheme."

U.S. District Judge Miriam Goldman Cedarbaum told jurors Monday it was critical that the panel decide the case only on the evidence — and ignore the onslaught of media coverage surrounding the doyenne of domesticity's every move.

"If you see a headline about the case, turn the page. Look at another story," the judge said after jurors took an oath of service Monday. "If you hear something about the case, change the channel."

The judge has already complained about heavy pretrial publicity that, in her estimation, has gone beyond the public's right to know. She banned reporters from watching jury selection.

Some of the jurors admit to connections with Stewart, reports CBS News Early Show National Correspondent Jon Frankel.

One of the jurors is a pharmacist originally from Uganda who said she had seen Stewart frequently "in the TV sometimes — her cooking recipes and stuff." But she said she had not paid close attention.

One juror is a paralegal who translates Italian and owns stock in Merrill Lynch & Co. — the brokerage where Bacanovic managed Stewart's account, including the ImClone shares.

Another is a reverend who told the judge she counsels married couples.