Federal Expert Witness in Martha Stewart Case Charged with Perjury

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Martha Stewart Stock Jumps on Twist in Case

Secret Service ink expert charged with perjury over allegedly false statements regarding a key document in the Martha Stewart trial. Impact on conviction of Martha Stewart unclear.

(MSN Moneycentral)

The soap opera that is the Martha Stewart case got a twist today, and shares of Martha Stewart Living Omnimedia (MSO) jumped as much as 20% as a result.

Larry Stewart, an ink expert with the U.S. Secret Service, was charged with two counts of perjury in connection with the government's prosecution of Martha Stewart. While not charged with insider trading itself, Martha Stewart was found guilty in March of lying to federal investigators about her sale of stock in the biotech company ImClone (IMCL).

Today, the government said Larry Stewart (no relation to Martha) falsely testified that he personally did the forensic exam on a worksheet that Martha Stewart's broker filled out. During the trial, he testified that the "@60" inscription that broker Peter Bacanovic made next to ImClone was written in a different ink than all the other marks on the worksheet.

The government used that conclusion to argue that Bacanovic had made the note to cover up Stewart's decision to sell her ImClone shares after learning that ImClone's then-Chairman Sam Waksal was selling after an unfavorable government ruling on an ImClone drug.

What makes this strange is that Bacanovic actually was acquitted on that falsification charge. Prosecutors said Larry Stewart was not involved in the exam directly.

The Secret Service expert also was charged with lying that he knew nothing about a book proposal on ink analysis.

David Kelly, the U.S. Attorney in New York City said the charges do “nothing to raise doubts about the accuracy” of Stewart’s conclusions.

Still, it remains unclear how this might affect Martha Stewart’s conviction. “It takes a lot to overturn a federal case,” Joe Tacopina told CNBC’s “Power Lunch.” And, of course, Bacanovic was acquitted on that charge.

NBC's Pete Williams noted that "this is a case about lying" and that Martha Stewart's legal team is likely to "say that this undercuts the case overall." That said, Williams added, it will be a "very uphill battle" for Martha Stewart.

Martha Stewart Living stock soared on the news of the government's action against Larry Stewart, especially at first. Shares popped by 20%, though the day's gain later moderated to the 15% range. Still, at less than $10 each, Martha Stewart shares are trading well below the $16 range where they spiked just before the end of her trial. And before the insider-trading scandal arose, the company's stock changed hands around $20 apiece.
 

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