Martha Stewart in court for appeal hearing

Martha Stewart enters the Federal Courthouse in New York
Martha Stewart enters a federal courthouse in New York Thursday to argue she was unfairly convicted on charges of lying to the government about a stock sale.Seth Wenig / Reuters
/ Source: The Associated Press

Martha Stewart was at a federal courthouse in New York Thursday to watch arguments before an appeals court on her bid to overturn her conviction on charges of lying to the government about a stock sale.

Stewart walked into the courthouse through a side entrance Thursday morning, and she smiled and joked with federal marshals as she passed through a metal detector. The homemaking mogul was wearing pinstriped pants, covering an electronic monitoring bracelet she is required to wear on her ankle while she serves five months of house arrest.

Martha Stewart’s lawyer, Walter Dellinger, argued before the federal appeals court that perjury charges against a government witness are grounds for a reversal of his client’s conviction on charges of lying about a stock sale.

Stewart’s lawyer argued that — although government ink expert Larry Stewart was subsequently acquitted — the charges he had faced should lead to “virtually automatic reversal” of Martha Stewart’s conviction. The two Stewarts are unrelated.

Dellinger also said it was unfair of the government to play tapes of interviews with codefendant Peter Bacanovic when Martha Stewart’s lawyers had no chance to cross-examine him. “These errors mattered,” he said. “They went to the heart of the defense.”

The government says the conviction is solid, and was based on overwhelming evidence. Legal experts have said it would be a long shot for the appeals court to overturn the verdict.

Entitled to $3.7 million
Martha Stewart, convicted last year on charges of lying to the government about a stock sale, was released from a minimum security prison in West Virginia two weeks ago. She will be reimbursed by her company for some legal bills related to her trial according to a Securities and Exchange Commission filing Wednesday.

Martha Stewart Living Omnimedia Inc. said an independent expert determined that Stewart, a billionaire, is entitled to $3.7 million for certain expenses related to her legal defense.

The 10-K filing stated that the company believes that any amount to be reimbursed to Stewart will be covered under its insurance coverage of directors and officers, and “does not believe that the payment will result in an expense to the corporation.”

Last November, Stewart had asked the company she founded to reimburse her for her legal bills. The $3.7 million figure applied to Stewart’s defense on a single criminal count — a charge that she boosted the company’s share price, and therefore her own wealth, in 2002 by declaring her innocence in a personal stock scandal.

A federal judge dropped that count before it went to a jury. Stewart and her ex-stockbroker were later convicted of lying to investigators about why Stewart sold ImClone Systems Inc. shares in December 2001.

Late last year, the company and Stewart had agreed to submit the reimbursement claim to an “independent expert” to determine whether Stewart was entitled for any reimbursement.

Last week, Stewart, 63, was named for the first time to Forbes magazine’s annual list of billionaires, with estimated wealth of $1 billion.

Five-month home detention
Martha Stewart was released from a federal women’s prison in Alderson, W.Va., on March 4, after serving five months there — the first half of her sentence.

Under the terms of her five-month home detention, she is allowed to work 48 hours a week outside her Westchester County estate.

Stewart was convicted of obstructing justice and lying to the government about her 2001 sale of nearly 4,000 shares of the biotechnology company ImClone Systems Inc., run by her longtime friend Sam Waksal.

Stewart’s lawyers claim her trial was tainted by improper insinuations by prosecutors that she was charged with insider trading.

Lawyers for Stewart have also said a biased juror, Chappell Hartridge, lied on his jury questionnaire in order to get on the panel that eventually convicted Stewart and broker Peter Bacanovic.

Prosecutors argued at trial that Stewart received a tip that Waksal was unloading his shares ahead of a negative government report about an ImClone cancer drug. The stock tumbled, and she saved $51,000 by selling her shares.

Stewart’s lawyers said the sale was based on a prearranged agreement with her stockbroker to sell once the stock dropped to $60 per share.