NEW YORK — Martha Stewart not only lied to investigators but also deceived investors, prosecutors told a jury Tuesday at a federal courthouse in Manhattan.

Her defense team fired back that there is no evidence tying Stewart to any criminal activity, and that prosecutors have built their entire case on "speculation, surmise, and guesswork."

Wearing an olive green suit, Stewart showed little emotion as she watched lawyers deliver opening statements in her stock fraud trial.

Stewart, 62, is charged with conspiring with her former stockbroker, Peter Bacanovic, to cover-up details of a Dec. 27, 2001, sale of stock in biotech firm ImClone during a federal investigation.

While U.S. Attorney Karen Patton Seymour described Stewart as a sophisticated Wall Street millionaire, her lawyer characterized her to the working-class jury as a "self-made business woman," born to a "poor" New Jersey family. 

"Martha Stewart spent most of her life improving quality of life for others," said defense lawyer Robert Morvillo, later assuring the jury that the defense is not asking for "support, bias or favoritism."

"This is an unusual case, not because Martha Stewart is a celebrity, but because the government has no direct evidence that Martha Stewart conspired to obstruct anything," said Morvillo, a well-known, white collar criminal lawyer. "This is a circumstantial case."

Stewart and Bacanovic are each charged with conspiracy, obstruction and lying to investigators. Stewart additionally faces one count of securities fraud, which alone carries a 10-year sentence.

Bacanovic, a 42-year-old former Merrill Lynch broker, also faces charges of falsifying documents and perjury. 

A Look Ahead

Seymour told the jury to expect to hear testimony from Bacanovic's former assistant — Douglas Faneuil, who pleaded guilty to a misdemeanor charge for his role in the scandal in exchange for his testimony.

Faneuil is expected to testify that Bacanovic, while on vacation, ordered him to tell Stewart that then-ImClone CEO Sam Waksal and four of his family members sought to sell all their shares in the company for a combined $7.5 million.

Faneuil is expected to testify that upon learning of that news, Stewart sold her shares worth approximately $250,000.

"The reason Martha Stewart dumped all of her shares was because she was told a secret," Seymour told the panel of eight women and four men. "Investors who didn't benefit from a secret tip like Martha Stewart lost millions of dollars."

Stewart's defense attorney, however, said the government's case lacked the context necessary to understand the events leading up to the sale of Stewart's stock.

The Worksheet

According to Morvillo, Stewart and Bacanovic had a discussion about selling numerous stocks in her portfolio on Dec. 21.

Bacanovic kept a worksheet that listed the stocks Stewart wanted to unload, and most of them received a checkmark on Dec. 21 to indicate they had been sold. ImClone, however, was also marked with the notation, "@60," and was not sold until Dec. 27.

Seymour said the worksheet, sent to a lab for analysis, shows a different pen was used for the "@60" notation. Prosecutors claim Bacanovic added it later to cover his tracks, so he could claim Stewart wanted to sell the stock when it reached a preset share price of $60 —not because Waksal was dumping his shares.

Richard Strassberg, the broker's lawyer, argued that switching pens is meaningless. "We all do it. He picked up different pens," Strassberg said.

"This story, this $60 agreement, just couldn't hold water," Seymour said. "He didn't want his friend Martha Stewart to be sitting on a stock that was about to be obliterated."

Morvillo, the last of three lawyers to deliver an opening statement, argued there's no record that Bacanovic and Stewart contacted each other either via phone or e-mail between the time of the ImClone sale and Bacanovic's first interview with investigators.

Therefore, he argued, the $60 selling-price conversation occurred before the sale of the stock, and prosecutors cannot back up their claim with any proof that it happened afterward.

"I don't think they did it by carrier pigeon. I don't think Pony Express existed in Mexico at that time [where Stewart was on vacation]," Morvillo joked. "So when and how and where did they concoct the $60 conversation?"

The Phone Log

The defense allowed the possibility that Stewart may have been told about Waksal's sale of stock prior to her own sale, but because she never spoke to Waksal himself, she didn't know about the FDA decision or that his sale was based on insider information.

Prosecutors, however, say otherwise. Just four days before that interview, they say Stewart changed a message in her assistant's phone log from "Peter Bacanovic thinks ImClone is going to start trading downward," to, "Peter Bacanovic re imclone [sic]."

The defense conceded that Stewart made the change, but downplayed it as a "25-second" lapse in judgment rectified moments later when she instructed her assistant to change the message back to its original wording.

The assistant, Anne Armstrong, is expected to testify for the prosecution.

Acting ImClone CEO Daniel Lynch, the first witness called to the stand, provided the jury with background on his company's history and the cancer drug Erbitux, the subject of the application the FDA rejected.

Stewart's mother, Martha Kostyra, and daughter, Alexis Stewart, were among those seated in the packed, oak-paneled courtroom Tuesday, along with scores of journalists including Barbara Walters and Chris Cuomo. 

Judge Miriam Cedarbaum adjourned court until Thursday due to a snowstorm watch.