After the prosecution rested its case against Martha Stewart on Friday, Judge Cedarbaum began hearing defense motions to dismiss some or all of the indictment:
The judge appeared to be most concerned about a count of securities fraud that accuses Stewart of deceiving investors in her own company, Martha Stewart Living Omnimedia (MSO), by asserting her ImClone sale was based on the $60 order. Cedarbaum called that count "the most problematic" in the indictment, and urged lawyers to focus on whether or not Stewart had criminal intent — not just a motive — to lie to her investors.The count to which the story refers is # 9. Long-time readers of this blog know that I regard Count 9 as having very little merit. For one thing, I find it extremely problematic that asserting your innocence could be deemed a material misrepresentation under the securities laws in any circumstances. For another, I simply don't believe the government can prove that Martha's denials were material - which they must do in order to prove securities fraud. (See also this post.) Finally, as the judge's comments suggest, I doubt whether the government can prove Martha acted with the requisite scienter (i.e., intent to defraud).
