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Martha Stewart Conviction Upheld

Bacanovic's case was sent back to a lower court for review.
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Updated from 6:30 p.m. EST

A federal appeals court affirmed the convictions of lifestyle expert Martha Stewart and Peter Bacanovic, her former broker, both of whom were found guilty nearly two years ago in a case centered on her trading in

ImClone Systems



The case revolved around allegations Stewart had profited from inside knowledge of developments at ImClone, a biotech company in which she owned stock. Stewart was friends with ImClone's now-imprisoned former chief executive Sam Waksal.

Prosecutors alleged that in late 2001 Stewart sold about 4,000 ImClone shares a day before the company told the public that the Food and Drug Administration wouldn't clear its application for the cancer drug Erbitux. Waksal, who had sold ImClone stock right before the announcement, was sentenced to seven years for insider trading.

The three judges on the appeals court panel on Friday did send Bacanovic's case back to a lower court for review and a determination of whether his sentence should be reduced.

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Stewart and Bacanovic were convicted in early 2004 of conspiracy, making false statements and obstruction of justice, and received five-month prison sentences. Their sentences also included a period of house arrest as well as fines.

Stewart, the former CEO of

Martha Stewart Living Omnimedia


, asked the court to vacate the stay on her sentence so she could get the prison time out of the way.

After serving her five months behind bars, Stewart went back to her television career, including a take on

The Apprentice

, the show made famous by Donald Trump, that featured a group of people competing to go to work for her.