March 02, 2004 11:41 AM

In a methodical three-hour closing argument in Manhattan federal court on Monday, the prosecutor in the case said Martha Stewart and her stockbroker Peter Bacanovic told careful lies but made careless mistakes in their attempt to keep investigators from the truth about why the domestic diva sold stock.

Prosecutor Michael Schachter told jurors that Stewart, 62, and broker Peter Bacanovic, 41, believed they would never be caught in their deception, say news reports.

The two defendants face federal charges that they lied to cover up why Stewart sold about $225,000 worth of ImClone Systems stock on Dec. 27, 2001. Prosecutors say Bacanovic sent word to Stewart that ImClone CEO Sam Waksal and his family were frantically dumping their own shares.

According to The New York Times, Schachter spent much of his three-hour argument trying to dismantle Stewart’s and Bacanovic’s defense, which largely rested on their insistence that they had struck a deal before Dec. 27 to sell Stewart’s shares when ImClone stock dropped below $60.

During his closing argument, Schachter detailed Stewart’s walking “up the steps to the United States Attorney’s office” on the afternoon of Feb. 4, 2002, with a plan in her head to tell investigators the truth: that she had not received insider information from close friend Waksal about the Food and Drug Administration’s plan to reject an application for approval of the biotech company’s promising cancer drug.

But, Schachter insisted, the plan backfired, because Stewart and Bacanovic “left behind a trail of evidence that exposed the truth about Martha Stewart’s sale.”

Richard M. Strassberg, a defense lawyer representing Bacanovic, in his closing argument (which is due to continue Tuesday), tried to shoot down Schachter’s contention that evidence and testimony collected over the last five weeks added up to proof that Stewart and Bacanovic are guilty as charged, says The Times.

“This doesn’t make sense,” Strassberg said repeatedly, insisting too that Bacanovic would never have risked his job or career for any client by disclosing what another client was doing.

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