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Updated March 17, 2005, 11:51 a.m. ET

Martha Stewart listens to appeals argument

NEW YORK (AP) — Perjury charges against a government witness are grounds for a reversal of Martha Stewart's conviction on charges of lying about a stock sale, her lawyer argued before a federal appeals court Thursday.

Lawyer Walter Dellinger argued that — although government ink expert Larry Stewart was subsequently acquitted — the charges he had faced should lead to "virtually automatic reversal" of Martha Stewart's conviction. The Stewarts are unrelated.

Dellinger also said it was unfair of the government to play tapes of interviews with codefendant Peter Bacanovic when Martha Stewart's lawyers had no chance to cross-examine him.

"These errors mattered," Dellinger said. "They went to the heart of the defense."


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The government says the conviction is solid, and was based on overwhelming evidence. Legal experts have said it would be a long shot for the appeals court to overturn the verdict.

Before the hearing, the homemaking entrepreneur had walked into the Manhattan courthouse through a side entrance, smiling and joking with federal marshals as she passed through a metal detector. Her daughter, Alexis, was by her side.

Stewart was wearing pinstriped pants, covering an electronic monitoring bracelet she is required to wear on her ankle while she serves five months of house arrest.

She was released from a federal women's prison in Alderson, W.Va., on March 4, after serving five months there - the first half of her sentence.

Under the terms of her five-month home detention, she is allowed to work 48 hours a week outside her Westchester County estate.

Stewart was convicted of obstructing justice and lying to the government about her 2001 sale of nearly 4,000 shares of the biotechnology company ImClone Systems Inc., run by her longtime friend Sam Waksal.

Bacanovic, a former Merrill Lynch & Co. broker, is serving a five-month prison sentence for lying to investigators.

Prosecutors argued at trial that Stewart received a tip that Waksal was unloading his shares ahead of a negative government report about an ImClone cancer drug. The stock tumbled, and she saved $51,000 by selling her shares.

Stewart's lawyers said the sale was based on a prearranged agreement with her stockbroker to sell once the stock dropped to $60 per share.

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Martha Stewart Stock Scandal




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