NEW YORK – A federal judge declined on Tuesday to slice two charges off the indictment of Martha Stewart, including one that accuses her of deceiving her own shareholders by publicly declaring her innocence.
The decision by U.S. District Judge Miriam Goldman Cedarbaum means the domestic arts queen will face all five charges the government brought against her when she goes to trial in less than two months.
Stewart’s lawyers had asked the judge to toss out a charge of securities fraud that accuses Stewart of trying to prop up the stock price of her media company when she spoke publicly about the ImClone Systems Inc. stock investigation.
The lawyers claimed the charge was a violation of Stewart’s First Amendment rights. But the judge said Stewart’s intent when she spoke about the scandal last summer would be for jurors to decide at the trial.
“This is unquestionably a novel application of the securities law,” Cedarbaum said. “However, that does not change the standard by which the sufficiency of the indictment must be judged.”
The judge also declined Stewart’s request to throw out a charge accusing her of obstructing the Securities and Exchange Commission’s investigation of her sale of ImClone, again suggesting the matter should be put to jurors.
Stewart, 62, is also accused of conspiracy and two counts of lying to investigators in connection with her Dec. 27, 2001, sale of about 4,000 shares of ImClone stock.
The government contends she was tipped off that the family of ImClone founder Samuel Waksal was trying to sell its shares. A negative government report about an ImClone cancer drug was issued the next day and sent ImClone shares tumbling.
Stewart claims she had a standing order with her stockbroker, Peter Bacanovic, to sell the stock when it fell to $60. Bacanovic was indicted with Stewart, also pleaded innocent and is to be tried with her on Jan. 12.
Stewart sat quietly during a 90-minute hearing in federal court in New York, resting her chin on her left hand, occasionally making notes in a small black notebook and sipping from a plastic bottle of Evian water.
She was hustled into a black sedan after she left the courthouse in lower Manhattan, but waved and smiled on her way to the car at construction workers who were installing steel posts in front of the building for security.
Shares of Martha Stewart Living Omnimedia Inc. fell after the ruling. The stock, which had been trading higher, was down 10 cents to close at $10.18 on the New York Stock Exchange.
The securities fraud count against Stewart addresses repeated statements she and her lawyers made in June 2002 after news of her connection to the ImClone scandal broke. Stewart publicly declared that she had had a standing order to sell ImClone and said she was cooperating “fully and to the best of my ability” with investigators.
The government claims those statements were deliberate attempts to keep the price of her company from falling amid news of the scandal.
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