Stewart faces tough appeal

? During Martha Stewart’s criminal trial, her lead attorney, Robert Morvillo, complained repeatedly that the judge had cut the legs off his planned defense.

It was unfair, he said in court, for the judge to prevent him from arguing that there was nothing illegal about Stewart’s Dec. 27, 2001, sale of ImClone Systems Inc. stock, so she had no reason to participate in the cover-up she had been charged with.

Now Morvillo and Stewart are going to find out whether the appeals courts think he was right.

Within hours of being convicted Friday of conspiracy, making false statements and obstructing the Securities and Exchange Commission investigation of the ImClone trade, Stewart and her former Merrill Lynch & Co. broker, Peter E. Bacanovic, said they would appeal.

Stewart and Bacanovic have a difficult task, outside lawyers said. Appeals judges review most issues against the standard of whether the trial judge abused his or her discretion, a tough benchmark to meet.

Due process violation?

The defense lawyers’ best chance may be to argue that U.S. District Judge Miriam Goldman Cedarbaum’s rulings violated the defendants’ rights, legal analysts said.

“The rules of evidence provide the judge with vast discretion in managing the evidence” that goes to a jury, said Barry Boss, a defense lawyer not involved in the case. “But you do have a Sixth Amendment and a due process right to articulate your chosen defense.”

An appeal, if nothing else, would probably delay the start of the defendants’ prison sentences. Experts in the federal guidelines say Stewart is likely to get about a year in prison when she is sentenced June 17, even though she faces up to 20 years.

Martha Stewart leaves Manhattan federal court in New York with her lawyer Robert Morvillo, right. Stewart was convicted Friday of obstructing justice and lying to the government about a superbly timed stock sale. Stewart's appeal process doesn't look easy, analysts say, but her attorney might be able to make a case that her right to due process was denied.

Lawyers for both defendants declined through spokesmen to comment for this article, but sources familiar with Stewart’s team said Cedarbaum’s decision to limit what defense lawyers could tell the jury would probably be central to her case before the U.S. Court of Appeals for the 2nd Circuit.

Cedarbaum not only refused to allow a defense expert to testify on insider-trading law, she also told Morvillo he could not argue that Stewart was being unfairly singled out for prosecution because of her celebrity.

Concealment questions

Stewart’s lawyers also plan to attack the prosecution’s argument that Stewart and Bacanovic’s statements to investigators about what happened on Dec. 27 were false because they “concealed” the true reason for the trade.

Stewart and Bacanovic told investigators that they had previously agreed that she would sell her ImClone stock if its price fell to $60 a share. According to federal investigators, both Stewart and Bacanovic said they spoke on the 27th and that she sold 3,928 shares after he told her the price had fallen below $60.

But Bacanovic’s former assistant Douglas Faneuil testified that he was the one who talked to Stewart and that he broke Merrill Lynch rules to tip her that ImClone founder Samuel Waksal and his two daughters were trying to dump their shares in the company. ImClone announced the next day that its top cancer drug Erbitux was in regulatory trouble.

The defense teams’ argument on the “concealment theory” centers on the fact that there are no official records of what questions Stewart and Bacanovic were asked by government investigators, legal analysts said.

For example, if Stewart was asked, “Tell us everything that went into your decision to sell ImClone on Dec. 27,” an answer that failed to mention the tip about the Waksals’ trading would almost certainly qualify as concealment. But if she was asked, “What was the main reason you sold?” her answer about the $60 arrangement might not meet the legal definition of a false statement.