Of Martha, Mountains, and Molehills


By Diane Brady In summing up the case against Martha Stewart, Assistant U.S. Attorney Michael Schachter perhaps said it best: Pay close attention to the evidence, and use your common sense, he told the jurors in his closing arguments on Mar. 1. The question now is whether they'll use their common sense to mull over the minutiae of ink types and alleged verbal agreements -- or take a step back and ponder whether these charges should ever have ended up in criminal court in the first place.

For those who have sat in the packed courtroom for the trial's duration, there's little doubt that federal prosecutors have presented a persuasive case that Stewart and broker Peter Bacanovic weren't quite on the up-and-up about why she sold her 3,928 ImClone (IMCL) shares on that fateful day of December 27, 2001. Bacanovic's earnest assistant, Douglas Fanueil, admitted that he tipped Stewart off to ImClone CEO Sam Waksal's efforts to dump his shares. Her travel pal, Mariana Pasternak, recalled how Stewart beamed that it was nice to have brokers tell you such things.

And let's not even start with those Fanueil e-mails, Stewart's effort to change phone messages, or the bungling comments from Bacanovic on tape. "The evidence is overwhelming," Schachter argued in his closing.

CHARGED WITH PANICKING? Still, while staring at the back of actor Brian Dennehy's head (he was in the row reserved for family and friends behind Stewart for the prosecution's closing argument), my mind flashed to a car speeding down the highway. You're in a hurry or might even be vaguely aware that you're going too fast. Suddenly, you're pulled over, and you panic.

"But officer, I was doing 55!" you blurt out. A bald-faced lie -- and to an officer of the law, no less! Your passenger pipes in: "Really, she was doing 55." Conspiracy! "No, look. I happened to write it down when she was turning that corner," your companion ad libs. False documents!

Don't get me wrong. Of course, insider trading is a more serious crime than speeding. Then again, Stewart wasn't actually charged with insider trading in this case. She and her broker are essentially charged with panicking and lying about an act that was widely regarded as a stretch of the definition of insider trading in any case. For this, she faces up to 20 years in prison and $1 million in fines.

BIG STARS AND BIG GUNS. If the poker-faced homemaker thought the charges were ridiculous when the investigation first launched more than two years ago, she certainly doesn't see them that way now. What may have started as a panicked reaction to a dumb mistake has become a high-stakes game in which she and her company, Martha Stewart Omnimedia (MSO), are already big losers.

Moreover, the trial is getting the kind of attention normally reserved for celebrities accused of far more serious crimes. And the U.S. District courtroom in Lower Manhattan has become a virtual cavalcade of stars. Dennehy, who once worked alongside Stewart as a broker -- a career choice now being held against her -- is just the latest celebrity supporter to show up, following stars such as Bill Cosby and Rosie O'Donnell.

The trial has drawn some of journalism's big guns, too, from The New Yorker's Jeffrey Toobin to Vanity Fair's Dominick Dunne, who missed the Mar. 1 arguments, presumably because of the Oscars the night before. Meanwhile, everything from the cost of Martha's handbag to her penchant for charging personal trips to her company has made headlines over the past few weeks.

THE TRIAL'S COST. And for what? To send a message that lying to federal investigators is serious business? That lesson could have been imparted through civil action and fines. The prosecution even brought a charge of securities fraud against Stewart, alleging that her actions misled investors in Martha Stewart Omnimedia. Apparently, this, too, was a warning to other high-profile entrepreneurs. But the oddball charge -- a stretch of the prosecutorial imagination -- was tossed out by the judge before it even got to the jury.

No question, defense lawyers face a tough task in explaining away a lot of the evidence in this case. They'll get their chance on Mar. 2. But as the public ponders the cost and message of this trial, I wonder if it's the prosecutors who have the most explaining to do. Brady is an associate editor for BusinessWeek in New York


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