A judge tossed out the most serious charge against celebrity chef and homemaker Martha Stewart, a count alleging she deceived investors in her company when she publicly declared her innocence in an insider-trading scandal.
Friday's decision by US District Judge Miriam Goldman Cedarbaum came just five days before jurors are expected to begin deciding the case against Stewart and her stockbroker.
"I have concluded that no reasonable juror can find beyond a reasonable doubt that the defendant lied for the purpose of influencing the market for the securities of her company," Cedarbaum wrote.
PHOTO: EPA
The securities fraud charge accused Stewart of trying to prop up the stock price of Martha Stewart Living Omnimedia when she claimed in 2002 that she had sold her ImClone Systems shares because of a deal with her broker to dump the stock when it fell to US$60. Prosecutors say that was a lie.
Many legal experts said they believed the charge was unprecedented, and Stewart's most ardent supporters cried that she was being prosecuted for simply saying she was innocent.
Legal analysts said the ruling was cause for celebration for Stewart's defense team -- but cautioned it was by no means a signal that she will be cleared of all charges by the jury.
Stewart still faces four criminal counts at the trial -- conspiracy, obstruction of justice and two counts of lying to investigators. The judge declined to throw out any of the five counts against broker Peter Bacanovic.
The securities fraud count carried a potential prison sentence of 10 years and a US$1 million fine. The remaining four counts against Stewart each carry a sentence of five years and a US$250,000 fine, though a conviction would carry a far lighter penalty under federal sentencing guidelines.
"I'm pleased that the judge has dismissed the most serious of the charges against me, concluding that there is no evidence to support it," Stewart said in a message posted on her personal Web site.
The charge had been criticized by Stewart's lawyers as a violation of the First Amendment and the judge herself has referred to the charge as "novel" and "problematic."
The government says Stewart sold her ImClone stock because Bacanovic sent word to her that her friend, ImClone Systems founder Sam Waksal, was frantically trying to sell his ImClone shares.
The decision put a charge into Martha Stewart Living Omnimedia stock, sending its shares up US$1.70, or nearly 13 percent, to US$14.80 in afternoon trading on the New York Stock Exchange.
Stewart herself was in the meeting with lawyers and the judge. Prosecutors declined comment and a spokesman for the US attorney's office did not immediately return a call for comment.
Closing arguments in the trial are scheduled to begin tomorrow. The jury is expected to begin deliberating on Wednesday.
Stewart's lawyers still must convince the jury that she was not lying to investigators when she told them in 2002 that she had no memory of being tipped about Waksal.
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