NEW YORK — The "evidence is overwhelming" that Martha Stewart is guilty of covering up an allegedly illegal stock trade, a prosecutor said during his closing arguments Monday.

"Martha Stewart thought she would never get caught," prosecutor Michael Schachter told jurors, but the homemaking mogul and her stockbroker, Peter Bacanovic, left a "trail of evidence" for federal authorities, he asserted.

The prosecution's closing came after it suffered a huge blow Friday, when U.S. District Judge Miriam Cedarbaum dismissed the most serious charge against Stewart — one count of securities fraud, which alone carries a 10-year term.

In her ruling, Cedarbaum determined prosecutors failed to produce sufficient evidence that Stewart's public declarations of innocence constituted an illegal effort to protect the stock price of her corporation, Martha Stewart Living Omnimedia.

Stewart still faces four charges — conspiracy, obstruction and two counts of lying to investigators — in connection with her Dec. 27, 2001, sale of stock in biotech firm ImClone that came one day before an FDA decision negatively affecting the company.

Although jurors were not privy to Cedarbaum's decision to toss the securities fraud charge, the judge told the panel Monday morning that the count was no longer part of the case "for reasons of law that are not your concern."

She instructed them that they are not to consider the absence of the charge during their deliberations. The jury is expected to begin deliberating Wednesday.

If convicted of all charges, Stewart faces a maximum of 20 years in prison. Bacanovic, her co-defendant, faces up to 25 years if found guilty.

Sound bytes of Bacanovic's taped interviews with federal investigators were peppered throughout Schachter's closing.

The prosecutor walked jurors through six weeks of testimony chronicling Stewart's stock sale, placing heavy emphasis on testimony by the government's star witness, Douglas Faneuil, Bacanovic's former assistant at Merrill Lynch.

During his four days on the stand, Faneuil said Bacanovic ordered him to tell Stewart that another client — ImClone CEO Sam Waksal — sought to sell $7.5 million worth of stock in the company on the morning of Dec. 27, 2001.

Faneuil said he told Stewart, who then instructed him to dump all of her shares. By selling a day before the FDA announced it would not approve ImClone cancer drug Erbitux, Stewart saved about $45,000.

"If you believe Douglas Faneuil, this trial's over," Schachter said. "You can tune me out. You can take a couple of days off. If you believe Douglas Faneuil, you don't need to hear any more."

Asserting that Fanueil had no reason to lie, Schachter defended the 28-year-old witness, who during cross-examination was questioned about past drug use and an apparent dislike for the famous defendant.

"Why on earth would somebody make this up?" Schachter said.

According to the prosecutor, Faneuil was not likely to "get caught," but he nonetheless came forward with his story only to face up to a year behind bars and to be banned from the securities industry for life.

'Makes no sense'

Bacanovic's defense lawyer, however, attacked Faneuil's credibility, calling him "a kid who imagines bad intentions from everyone he deals with, who sees a conspiracy around every corner."

"He clearly has a great motivation to lie — to protect himself," said lawyer Richard Strassberg. Faneuil made a plea deal with prosecutors and in exchange for his testimony is expected to receive a sentencing recommendation that could keep him out of prison.

Repeatedly charging that the prosecution's version of events "makes no sense," Strassberg suggested Faneuil took it upon himself to tell Stewart about Waksal's shares.

Earlier, Schachter attempted to dismantle the story Stewart and Bacanovic have maintained — that they had a preexisting agreement to sell the stock when the price hit $60 per share.

Calling it a cover story, Schachter said Stewart and Bacanovic "backed into" that figure since Stewart had previously sold shares of ImClone in her corporation's pension fund at $61 share.

But Strassberg said that Faneuil never knew about the so-called $60 conversation, proving he lied about the existence of a cover-up.

"If Douglas Faneuil is part of the conspiracy ... he doesn't lie about what they say is the point of the conspiracy," Strassberg said.

Despite the serious allegations, jurors giggled Monday when Schachter updated them about one government witness, who was nine months pregnant when she took the stand. Schachter announced she had given birth to a girl three days after testifying.

Actor Brian Dennehy joined the list of celebrities Monday who have come to court to watch the proceedings. Since the trial began five weeks ago, Rosie O'Donnell, Barbara Walters and Bill Cosby have appeared in the courtroom.

Strassberg is scheduled to finish his closing argument Tuesday morning. Stewart's lawyer, Robert Morvillo, will deliver his closing remarks following Strassberg's. Lead prosecutor Karen Patton Seymour is expected to deliver a rebuttal before jurors are instructed on the law and begin deliberations.