Martha Stewart cleared of most serious charge

A federal judge in Manhattan yesterday dropped the most serious of five charges, that of securities fraud, against the home-making diva Martha Stewart, on the eve of her high-profile trial going to the jury.

The decision, delivered in a 23-page ruling by Judge Miriam Cedarbaum, is a welcome boost for Ms Stewart after a month of testimony that often seemed to tilt the government's way. The dropped charge would have carried a maximum sentence of 10 years in prison.

"Here, the evidence and inferences the government presents are simply too weak to support a finding beyond a reasonable doubt of criminal intent," the judge wrote. However, she declined to put aside four other charges against Ms Stewart: conspiracy, obstruction of justice, and two counts of lying to investigators. Each of those could carry prison sentences of five years.

The case, which has generated daily headlines in the United States, centres on the circumstances under which Ms Stewart sold nearly 4,000 shares held in the biotech company ImClone in late December 2001, just one day before news from the US government that it was withholding approval of one of its drugs sent the company's shares plunging.

In pressing the securities fraud charge, the government asserted that six months after the sale, Ms Stewart tried to persuade investors in her own company, Martha Stewart Omnimedia Living, that she had done nothing wrong. For every dollar that the stock might have slipped in her company, she stood personally to lose $30m. In an always packed courtroom, Ms Stewart and her co-defendant and former broker Peter Bacanovic listened as the government brought forward 21 witnesses to uphold its version of events - that through Mr Bacanovic, Ms Stewart was tipped off to the imminent bad news about ImClone and then reacted by dumping the stock. They both insist that they had a prior arrangement to sell her shareholding in Imclone once the shares sunk below a certain threshold. Jurors looked stunned early last week, when defence lawyers for Ms Stewart wrapped up their case after questioning only a single witness and for only for 17 minutes. Jurors will listen to closing arguments on Monday.