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Martha Stewart scores victory on testimony matter

Lawyers for Martha Stewart scored a victory on Friday when the judge in Stewart's criminal trial said she would not allow the jury to hear testimony from Wall Street analysts and other experts about whether public statements she made influenced investors in her company.

The ruling by US Judge Miriam Goldman Cedarbaum is helpful to Stewart's defense on the charge of securities fraud she faces. A person involved in Stewart's defense said the ruling "renders the securities fraud charge dead on arrival," although other material may be introduced by prosecutors themselves.

The motion made by Stewart's lawyers, which came in the form of a letter delivered to the judge on Thursday, was not made available. Stewart is accused of misleading investors when she made public statements about her sale of nearly 4,000 shares of ImClone Systems, calling it "entirely lawful" and saying it took place because of an agreement with her broker to sell if the share price fell below US$60.

The securities fraud charge has been called "unusual" or "novel" by various legal experts, including Cedarbaum, and it may be difficult to persuade jurors of Stewart's guilt because her name is so closely linked to that of her company.

Defense lawyers also questioned an FBI agent, Catherine Farmer, about her interviews with Stewart, pointing out to the jury that Farmer did not tape record the interviews and relied solely on her own notes and her memory when she wrote up a report on what Stewart told her.

The prosecution announced that it would rest next Thursday.

Meanwhile, the company, Martha Stewart Living Omnimedia, sustained a public-relations blow with the revelation that Kmart, its longtime partner in selling a line of Martha Stewart sheets, towels and other merchandise, is suing it in a federal bankruptcy court.

The lawsuit was filed Wednesday but announced Friday by Stewart's company, which said that Kmart was seeking to pay Martha Stewart Living Omnimedia less than it was owed under a contract signed in 2001.

At issue are royalty payments that Martha Stewart Living Omnimedia says it is owed but that Kmart contends are not part of the contract. Stewart's company is guaranteed a minimum payment even if sales in Kmart stores fall short, and her company has said that it expected only the minimum for last year.

In a statement, Martha Stewart Living Omnimedia said that its contract with Kmart required two types of royalty payments. One is based on total sales of all licensed products in Kmart stores, and the other based on sales in individual product categories, such as housewares. The payments are calculated on a quarterly basis but paid once a year, at the end of Kmart's fiscal year, which ends in January.

Merchandise sold through Kmart accounts for most of products sold by Martha Stewart Living Omnimedia.
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