Jury selection starts for style Martha Stewart's trial

By DAVID USBORNE in New York

Martha Stewart is used to being in the spotlight - on television, on the covers of her magazines, in promotions for her linen lines - evangelising on the art of maintaining the perfect home, from the pine-scented bathroom to the copper-potted kitchen. But now her stage is to be the courtroom dock.

Jury selection was to begin overnight for a trial in Manhattan that may see the once-serene world of Stewart come crumbling down. When testimony finally begins, later this month, all of America will be awaiting her fate.

The case against Stewart has been two years in the making. It all started on December 27, 2001, when she sold all of a small stake she held in a biotech company called ImClone. The transaction was worth only US$228,000, small change for her. But very soon federal investigators were chasing her.

Just the day before, the founder and head of ImClone, Sam Waksal - and a long time Stewart friend - had also offloaded shares in the company. He did so because he had got early warning that the Government was set to rule against approval of a new cancer drug the company had been developing. Waksal, who was imprisoned last year for insider trading, knew the finding would crush ImClone's shares.

Prosecutors are preparing to argue that Stewart acted just 24 hours later after being tipped off by Waksal or by the broker they both used. While forbearing from charging her with insider trading, they will accuse her of trying to obstruct justice, of lying about the circumstances of her shares sale, tampering with phone records and doctoring other records. If found guilty, she could be sent to prison for 10 years.

Already, the reputation of Stewart is in shreds and the fortunes of her company, Martha Stewart Living Omnimedia, have been badly dented.

Rather than going for a plea deal and the likelihood of a milder sentence, she has proclaimed her innocence. She argues that she had a prior arrangement with her broker that he would sell her ImClone shares if they fell below US$60 each, as, indeed, they had.

The broker at the centre of the affair is Peter Baconovic.

But it is his former assistant at Merrill Lynch, Douglas Faneuil, who may prove pivotal for prosecutors.

He was fired by the brokerage house after he admitted to federal investigators that he lied about conversations that took place on the day in question, in return for a free airline ticket and an extra week's annual leave.

Prosecutors are also expected to highlight notes submitted by Stewart purportedly demonstrating how she and Baconovic had agreed on the US$60 sell level. They will say, however, that a note saying "@60" was added later with a different pen.

Stewart reigned for years as America's most-loved home-making guru. But, as she herself admitted, there is something about her that drives millions to loathe her.

If the people who are chosen to hear the case in the Federal Courthouse in Manhattan are among those Stewart-haters, she might be doomed.

- INDEPENDENT