Stewart, 62, was also charged with securities fraud and conspiracy with her Merrill Lynch broker Peter Bacanovic to conceal the sale of stock of her company – Martha Stewart Living Omnimedia – after news of the scandal was breaking last year.
But in motion papers filed with U.S. District Court Judge Miriam Cedarbaum, Stewart’s lawyers assailed the securities fraud charge, which carries a maximum term of 10 years in prison, arguing Stewart was defending herself against “noxious” allegations.
Prosecutors charge Stewart was trying to prop up her company’s stock price via “a series of false and misleading public statements” regarding the ImClone sale and assert she made statements “with the intent to defraud and deceive purchasers and sellers of MSLO stock and maintain the value of her own stock and halt or slow erosion of its price.”
Stewart’s lawyers, Robert Morvillo and John Tigue, said prosecutors are trying to “criminalize” her statements and that the government has tried to distort her public declarations she had not engaged in insider trading.
“This charge is unprecedented in the seventy-year history of the federal securities laws,” they wrote. They also seek to dismiss a second count which charges her with obstruction of justice between January and April 2002 by giving false and misleading statements and information to the Securities and Exchange Commission regarding the ImClone sale.
Stewart’s legal team also argues certain of the alleged “false statements” prosecutors charge Stewart made should be dismissed because they were not materially relevant to the investigation or “because even the prosecution’s theory admits that they were true.”