Martha's Fraud Charge Gets Tossed

By Todd Peterson

Friday February 27, 2004 12:52 PM EST

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A federal judge on Friday handed Martha Stewart the best news she's received in some time.

U.S. District Judge Miriam Goldman Cedarbaum threw out the most serious charge against the harried homemaker, securities fraud. The charge claimed Stewart deceived investors in her company by lying about the sale of her shares of ImClone Systems stock, the Associated Press reports.

The decision is considered a major victory for the defense. If convicted of securities fraud, Stewart could have faced 10 years in prison.

But the fraud claim had been questioned by legal experts since the start of the trial, with the judge openly referring to it as a "novel" charge.

Stewart still faces four other charges, including conspiracy, obstruction of justice, and two counts of lying to investigators, stemming from her Dec. 27, 2001, sale of nearly 4,000 shares of ImClone stock, AP reports.

Stewart is on trial with her former stockbroker Peter Bacanovic, who was not facing securities fraud charges. None of his charges were tossed, AP reports.

Stewart's defense team rested its case Wednesday. The jury is expected to begin deliberations early next week.

The ruling comes just two days after the death of a prosecution witness in the case. On Wednesday, Jeremiah Gutman, an attorney who represented the prosecution's star witness, Douglas Faneuil, collapsed on a train platform in Westchester County, N.Y. Gutman, 80, later died at a hospital.

Faneuil was an assistant to Bacanovic who told investigators that his boss had ordered him to tip off Stewart about ImClone System's founder Sam Waskal's sale of shares in his own company. Prosecutors believe that information precipitated Stewart's sale of her shares of ImClone.