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Judge May Toss Securities Fraud Charge Against Martha

Monday the Judge in the Martha Stewart trial will hear more arguments and decide whether to throw out the securities fraud charge against her. From the questions put to the prosecution on Friday, this seems quite possible.

Cedarbaum on Friday repeatedly asked prosecutor Karen Patton Seymour what evidence supported the claim that Stewart sought to defraud investors in Martha Stewart Living Omnimedia when Stewart issued allegedly false public statements and releases protesting her innocence in June 2002.

....Seymour said Stewart's intent to defraud investors could be inferred from the circumstances: MSLO stock was dropping, Stewart stood to personally lose $30 million for every dollar it dropped, and she knew that reassuring investors that she was both cooperating with the government and had a legitimate motive for selling the stock was designed to prop up the share price.

It was at that analyst conference, Seymour said, that Stewart "drew the link" between her own conduct in the ImClone affair and the price of MSLO. Seymour also said the jury should be allowed to dissect Stewart's statements when considering the securities fraud charge and separate, for itself, the "innocent" motive of repairing her damaged public image from the "illegal" motive of lying to boost the stock.

"But we are talking about a criminal case," Cedarbaum responded. "I would like you to give me a criminal securities fraud case in which there was an innocent purpose and a guilty purpose and the jury was allowed to decide which was the purpose."

If the Judge throws out the securities fraud charge, that leaves the jury with the task of deciding charges of obstruction of justice, making false statements to investigators and conspiracy.

< Corporate Fraud Trial Begins | Guantanamo: Ease of Some Restrictions Not Enough >
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