Forensic Expert Charged With Lying in Martha Stewart Case

A government expert lied about his role in examining a spreadsheet used in the insider trading trial of Martha Stewart and Peter Bacanovic, federal prosecutors charged Friday. Officials don't believe the allegations will affect the pair's convictions.

Larry Stewart, the chief forensic scientist for the Secret Service, wasn't present at an initial examination of the spreadsheet in August 2002, despite testifying that he was involved in each forensic inspection of the document, the government alleged. He is charged with two counts of perjury in a complaint released Friday afternoon.

Martha Stewart and Bacanovic, her former Merrill Lynch broker, were convicted March 5 of lying to the government about Stewart's well-timed sale of about 4,000 shares of ImClone Systems(IMCL) in December 2001. Both are awaiting sentencing next month.

Among other things, Bacanovic was charged with altering a spreadsheet record of Stewart's stock sales, an allegation supported by the Secret Service examiner, who testified Feb. 19 that the ink used to make a notation on the sheet was different from other ink on the page. Ironically, making and using false documents was the one count on which Bacanovic was ultimately acquitted.

The government contended Bacanovic changed the record to suggest his client had a standing order to sell ImClone "at 60." The existence of a preset stop-loss order was central to the defense argument that Martha Stewart didn't make the ImClone sale after getting a tip, but simply sold her stock according to existing plans.

Friday's complaint alleges that "notwithstanding his testimony at trial that he had personally participated in each of the forensic examinations of the worksheet, [Larry] Stewart had no involvement in the original examination of the worksheet conducted in August 2002, and in fact did not even learn of the examination until it was complete," the U.S. Attorney said.