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Updated from 1:45 p.m. EST

Despite the judge's strict instructions against it, the two sides in the Martha Stewart trial used the press -- in the form of past newspaper articles -- to advance their cases.

In the trial's afternoon session Wednesday, the government asked Peter Melley, an


investigator, to chart the daily stock price movement for shares of Stewart's company,

Martha Stewart Living Omnimedia


, for June 2002, the month the story broke in the news media.

As Melley charted the daily price of the stock, however, the government endeavored to tie price swings in the stock to press releases by Stewart proclaiming her innocence. By employing Melley to read Stewart's press statements, as well as newspaper articles from the period, the government was able to use the content of the articles to aid its securities fraud case against Stewart.

The government is trying to convince jurors Stewart knew her Dec. 27, 2001, sale of about 4,000

ImClone Systems


shares could hurt her own company's stock. Stewart faces as many as 10 years in prison if convicted of securities fraud, which the government alleges she committed by publicly maintaining her innocence after selling ImClone days before the shares were gutted by a regulatory setback.

The government's strategy of using Melley to read the articles to the jury in federal court in Manhattan was much to the dismay of Judge Miriam Goldman Cedarbaum, who repeatedly requested that both sides use the articles merely for context, not content.

For example, on June 18, 2002, at 5:33 p.m, Stewart released a statement saying her trade was lawful and that she has been speaking "with the SEC and have been cooperating with them to the best of my ability."

Melley testified that on June 19, 2002, the trading day following Stewart's statement, MSO rose from an opening price of $14.40 to close the day at $16.45.

Stewart's defense attorneys, who originally introduced the articles, also superseded Cedarbaum's instructions by using the same articles and press releases to their advantage.

In the case of the price spike in MSO shares on June 19, 2002, Stewart's lawyers introduced an MSO press release from June 19, 2002, which announced that the company would be increasing earnings guidance at a Piper Jaffray media conference. The defense contended, therefore, that the company's performance, not Stewart's statement of innocence, was the factor behind the jump in price.

Stewart's defense team, led by Robert Morvillo, originally introduced the series of June 2002 articles to demonstrate how the media were unfairly accusing their client of insider trading.

As one of many examples, the defense introduced a June 12, 2002, transcript from a Fox news program with Neil Cavuto in which Rep. Jim Greenwood, (R., Pa.), said "I believe that these trades were made on inside information and that's illegal."

The defense portrayed Stewart's claim of innocence in a June 12, 2002, press release as an attempt to answer such charges they viewed as untrue.

Stewart spokeswoman Susan Magrino said on June 12, 2002: "Ms. Stewart did not receive any non public inside information prior to her sale of a small number of ImClone shares. Her transaction was entirely lawful."

The numerous articles being read to the jury led Richard Strassberg, the lawyer for Stewart's former broker and co-defendant Peter Bacanovic, to ask Cedarbaum for a mistrial. Cedarbaum quickly denied Strassberg's request, saying she remained confident that the jury would focus only on the true intent of the articles.

Government attorneys also spent part of the morning session pursuing the securities fraud charges by questioning Gregory Blatt, the former general counsel of Martha Stewart Living, who now holds the same post at




In evidence was a Jan. 22, 2002, email to Blatt from Andrew Nussbaum, a partner in the corporate division of the high-profile Manhattan law firm of Wachtell, Lipton, Rosen & Katz. "On MS/Imclone matters, John Savarese will assist," it reads. Savarese is a partner in the firm's litigation division who eventually accompanied Stewart to her Feb. 4, 2002 interview with

Securities and Exchange Commission


Under cross-examination by defense attorneys, Blatt conceded that the company was worried when stories about the stock trade started to appear in June 2002. "We were very concerned with the negative publicity," Blatt said. "It was having a reaction on advertisers and potential business partners." Still, Blatt said, despite his "persistent" efforts to write a press release, Stewart's attorneys never called him back. A release went out close to a week later.

Stewart had appeared less vulnerable to the securities fraud count after Judge Cedarbaum last week barred prosecutors from calling expert witnesses who would have testified that Stewart's proclamations of innocence would have affected the actions of Martha Stewart Living investors.

Stewart and Bacanovic also are on trial on charges of obstruction of justice, for allegedly lying about the sale, which came on the heels of frantic efforts to dump the stock via Bacanovic's office by the family of ImClone founder Sam Waksal.

The obstruction count is the less-serious offense from a sentencing perspective. But it looked to be the more viable after defense lawyers produced little to back up their claims that Stewart sold her shares under an informal stop-loss agreement with Bacanovic.

On Tuesday, prosecutors introduced a number of emails they said showed Stewart to be a demanding client who might have intimidated Bacanovic. They want to show that Bacanovic's fear of the domestic entrepreneur might have led him to break the law for her.

One email, sent by Stewart to Bacanovic on Nov. 29, 2000, read: "I've made two or three horrendous mistakes and not sold when I was ahead." Another that same month quoted her saying, "I think it is time for me to give my money to a professional money manager."

Defense attorneys pointed out Wednesday that while Stewart might have occasionally sounded angry in emails, she didn't transfer her account with the Merrill broker.

Due to the length of today's testimony, government attorneys said they expect to close on Friday instead of Thursday afternoon as they originally expected. The government said Stewart's close friend Mariana Pasternak will testify on one of those two days.