- A Secret Service investigator lied about his role examining
a spreadsheet used in the insider trading trial of Martha Stewart and Peter
Bacanovic, federal prosecutors charged Friday. Officials don't believe
the allegations will affect the pair's conviction.
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- Larry Stewart, the chief forensic scientist for the Secret
Service, wasn't present at an initial examination of the spreadsheet in
August 2002, despite testifying that he was involved in each forensic inspection
of the document, the government alleged. He is charged with two counts
of perjury in a complaint released Friday afternoon.
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- Martha Stewart and Bacanovic, her former Merrill Lynch
broker, were convicted March 5 of lying to the government about Stewart's
sale of about 4,000 shares of ImClone Systems (IMCL:Nasdaq) in December
2001. Both are awaiting sentencing next month.
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- Among other things, Bacanovic was charged with altering
a spread-sheet record of Stewart's stock sales, an allegation supported
by the Secret Service examiner, who testified Feb. 19 that the ink used
to make a notation on the sheet was different from other ink on the page.
Ironically, making and using false documents was the one count on which
Bacanovic was ultimately acquitted.
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- The government contended Bacanovic changed the record
to suggest his client had a standing order to sell ImClone "at 60."
The existence of a preset stop-loss order was central to the defense argument
that Martha Stewart didn't make a perfectly timed stock sale after getting
a tip, but simply sold her stock according to existing plans.
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- Friday's complaint alleges that "notwithstanding
his testimony at trial that he had personally participated in each of the
forensic examinations of the worksheet, [Larry] Stewart had no involvement
in the original examination of the worksheet conducted in August 2002 and
in fact did not even learn of the examination until it was complete,"
the U.S. attorney said.
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- "It is further alleged that notwithstanding his
testimony that he worked 'side by side' with another examiner in conducting
a supplemental examination of the worksheet in January 2004, Stewart was
consulted only briefly about the examination, and performed none of the
actual work on it," the U.S. attorney said.
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- "The government does not believe that the integrity
or validity of any of Martha Stewart or Peter Bacanovic verdicts is called
into question by today's filing," he said said.
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- Mr. Stewart, 46, was also charged with lying about knowledge
of a book proposal shown to him by defense lawyers when on the stand. He
is currently under arrest and faces a maximum total of five years in prison
on both counts. Arraignment is scheduled for later Friday
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- U.S. Attorney David Kelley said the charges were the
result of information received by his inspection division 10 days ago.
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- "The charges are troubling because a lab examiner
violated the public trust," Kelley said. "However, we are confident
the false testimony will have no impact on the decision."
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- Conceivably, a perjury charge could give lawyers for
Stewart and Bacanovic grounds for a new trial. But motions for a new trial
are difficult to win and the road will be particularly hard in light of
the U.S. attorney's statements. Typically the defense must demonstrate
the discovery of new evidence that could have led the jurors to a different
verdict.
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- Judge Miriam Cedarbaum has already rejected an earlier
motion for a new trial based on questions about the pre-trial truthfulness
of one of the jurors in the case. Asked if Friday's revelations cast "a
cloud over the convictions," Kelley replied: "No."
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- Several defense lawyers contacted by TheStreet.com said
the alleged misrepresentation probably will not be enough to persuade Judge
Cedarbaum to grant a new trial. But it could help Stewart on appeal, as
it adds the list of potential errors committed during the trial.
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- The government held that Bacanovic added the "at
60" annotation after the fact and called Larry Stewart to the stand
on Feb. 19, about two weeks into the trial. The scientist testified that
the pen used to make the annotation was an expensive one, while other markings
on the same sheet were made from a cheap Paper Mate pen. Lawyers from both
sides were meticulous in vetting the finer points of ink analysis with
Mr. Stewart, with a defense expert testifying that another marking on the
page was similar to the "at 60" notation and that numerous pens
were used elsewhere on the sheet.
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- In sometimes flustered testimony under defense cross-examination,
Mr. Stewart acknowledged in his Feb. 19 testimony that not every mark on
the page got the same initial analysis, but said infrared analysis of one
mark that appeared similar to the "at 60" annotation was inconclusive.
Mr. Stewart said testing the second mark, a dash next to an entry for Apple
Computer, was impossible because the defense had used too much of the sample
in its own tests.
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- http://www.thestreet.com/funds/gregggreenberg/10161722.html
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