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America's cookery guru accused of shares fraud.

America's domestic goddess Martha Stewart lied to investigators and committed 'serious federal crimes' by selling off shares based on a tip no one else had, a prosecutor said yesterday.

But the defence said the case was based on speculation and guesswork.

In her opening statement in a New York court, assistant US attorney Karen Patton Seymour told jurors that Stewart had lied to federal agents, and 'multiplied that lie by feeding it to investors in her own company.'

'She was told a secret that no other investor had,' Seymour said.

One count accused billionaire Stewart of deliberately trying to prop up the shares of her domestic lifestyle company, Martha Stewart Living Omnimedia, in 2002 by saying she had done nothing wrong and was co-operating with investigators. 'She tried to mislead investors ... to lift that dark cloud hanging over her reputation,' Seymour said.

But Stewart's lawyer, Robert Morvillo, said the case against his celebrity client was circumstantial at best.

The prosecution was based on 'speculation, surmise and guesswork,' Morvillo said in his opening statement. 'And they will ask you to ignore the lack of direct evidence.'

Stewart is accused of working with her stockbroker to concoct a story about why she sold 3,928 shares of ImClone Systems on December 27, 2001 -just before shares in the fledgling biotechnology company plunged when the government refused to review Erbitux, an ImClone cancer drug and the only drug in the company's pipeline.

The government claims Stewart was tipped that ImClone founder Sam Waksal was trying to dump his own shares in his company.

Stewart and broker Peter Bacanovic, Stewart's codefendant, say they had a preexisting agreement to sell ImClone stock when it fell to 60 dollars per share.

In discussing the case against Bacanovic, Seymour said he knew that it was against Merrill Lynch rules to pass information about one client's trading -in this case Waksal -to another.

'He knew that he couldn't do it.'But he didn't want his friend Martha Stewart sitting on a stock that was about to be obliterated by bad news.'

Bacanovic's lawyer, Richard Strassberg, told jurors that postsale phone calls between his client and Stewart were not part of a cover-up, but a routine part of business.

The jury was a told by Judge Miriam Goldman Cedarbaum that it was critical that they decide the case only on the evidence - and ignore the onslaught of media coverage surrounding Stewart's every move.

Waksal pleaded guilty to securities fraud charges and is serving a prison sentence of more than seven years after tipping his daughter to sell her shares of ImClone. The FDA, meanwhile, is expected to approve ImClone's Erbitux in the first quarter.

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Martha Stewart arrives with a member of her legal team at the federal courthouse in New York for opening statements in her securities fraud trial
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Publication:The Birmingham Post (England)
Date:Jan 28, 2004
Words:472
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