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Saturday, May 22, 2004

Stewart's attorneys said the perjury charges cast new doubt on the government's case against the domestic entrepreneur. Prosecutors insisted the charges did not undermine the convictions of Martha Stewart or her former broker, Peter Bacanovic.

The expert, Larry F. Stewart, was called as an expert witness by the government to discuss ink used on a worksheet prepared by Bacanovic listing stocks in Martha Stewart's portfolio.

Prosecutors had accused Bacanovic of doctoring the worksheet to back up a cover story for why Martha Stewart sold ImClone Systems Inc. stock. Bacanovic was cleared on that charge, but convicted on four other counts.

Larry Stewart, who is not related to Martha Stewart, testified that he had worked on two ink-analysis examinations of the worksheet, in August 2002 and January 2004. Prosecutors said the Secret Service informed them last week that Stewart, the laboratory director at the Secret Service, did not work on those tests.

In addition, Stewart falsely testified that he was familiar with a proposal for a scientific textbook on ink analysis that had been submitted by two of his subordinates, Manhattan U.S. Attorney David Kelley said.

Larry Stewart, 46, of Bethesda, Md., was taken into custody by federal agents. At a brief court appearance Friday, Stewart was released on $50,000 bail and a preliminary hearing was set for June 10. He did not enter a plea.

Larry Stewart's lawyer, Lawrence Feld, said he hadn't had an opportunity to discuss the charges with his client.

The two counts of perjury -- based on eight statements made by Larry Stewart during his testimony on Feb. 19 and Feb. 25 -- carry up to 10 years in prison.

"We have to hold all people to the same standard of integrity, and today we hold true to those commitments," Kelley said.

Martha Stewart and Bacanovic were convicted March 5 of lying to federal authorities about why Stewart sold 3,928 shares of ImClone in December 2001, just before it plunged on a negative government report. She is scheduled to be sentenced June 17, and faces 10 to 16 months in prison.

Stewart was convicted of conspiracy, obstruction of justice and making false statements. Bacanovic was convicted of perjury, obstruction, conspiracy and making false statements -- but was acquitted of falsifying the worksheet.

Federal prosecutors disclosed the perjury charges in a complaint filed in Manhattan federal court and in a letter to U.S. District Judge Miriam Goldman Cedarbaum, who presided over the Martha Stewart trial.

"The discovery that Mr. Stewart testified falsely in no way compromises the validity of the guilty verdicts returned in this case against either defendant," the prosecutors wrote to the judge.

Lawyers for Martha Stewart and Bacanovic quickly issued statements saying the perjury charges called the validity of the convictions into question.

"We believe that the perjury of a key government witness undermines any integrity there was in the jury's verdict and will require a new trial, and we will pursue one," Bacanovic lawyer Richard Strassberg said.

Martha Stewart's lead lawyers, Robert Morvillo and John J. Tigue, said the new information "further undermines the integrity of the prosecution of Martha Stewart and Peter Bacanovic."

Cedarbaum has already rejected calls by both defendants for a new trial based on allegations that a juror lied about a past arrest on assault charges in order to get on the jury. In that ruling, earlier this month, the judge said the defendants had not offered sufficient proof that the juror lied.

The key portion of Larry Stewart's testimony was that a notation of "(at)60" made on the Bacanovic worksheet was in a different ink than almost every other mark on the sheet.

The notation was an important part of Martha Stewart and Bacanovic's defense -- that they had a pre-arranged deal to sell ImClone when the stock fell below $60 per share.

Kelley said there was no reason to believe the actual testing of the worksheet -- performed by another lab worker at the Secret Service -- was inaccurate.

He also pointed out that lawyers for Bacanovic never disputed that the "(at)60" ink was different from other marks on the sheet. The lawyers argued Bacanovic had simply used several different pens on the worksheet.

Kelley said Stewart had been suspended from the Secret Service.

Andrew Wurst, a spokesman for the Secret Service, said the agency was fully cooperating with federal prosecutors, and he defended the agency's lab work.

"The validity of the examination is not in question," Wurst said. "These allegations are directed toward one individual."

Shares in Martha Stewart Living Omnimedia Inc. rose nearly 9 percent, or 75 cents, to close at $9.30 on the New York Stock Exchange.

© 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

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