Little Ms Perfect Runs Out of Time

Martha Stewart snapped back defiantly when she was asked recently: "Do you feel that some people are delighted by your downfall because, as one reporter put it, 'little Miss Perfect has fallen on her face'?"

"I haven't fallen on my face yet," she retorted. Time, though, is running short. The long awaited trial of one of America's most prominent businesswomen begins tomorrow and promises to attract enormous media attention. Ms Stewart has been charged with obstruction of justice and making false statements to government investigators during an inquiry into possible insider dealing in shares of the drugs firm ImClone.

Her friend Sam Waksal, the ImClone founder, is already in prison, serving a sentence of more than seven years.

The question put by the interviewer Barbara Walters on the ABC network alludes to the American public's fascination with the case. Ms Stewart trades in perfectionism, whether it is the lightest soufflé, how best to preserve clothes from the perils of moths or throwing the ideal Christmas party. She hosts television shows on cookery and home-making, has a best selling lifestyle magazine, a syndicated newspaper column and sells a range of everyday merchandise like towels and bedding. That she might have done something that reveals a less than perfect trait is too delicious a prospect for the tabloids.

In recent months she has been working hard to present a more human and vulnerable side. As well as the interview with Ms Walters, she appeared on a high profile special with CNN veteran Larry King.

She told how "scared" she was of prison and described the past two years as "the most difficult period in my life". She walked Ms Walters through the humble New Jersey streets where she grew up as the youngest of six. On the Larry King show she spoke of her dreams of becoming a grandmother and even brought along her 89-year-old mother who made Polish babka.

Ms Stewart's troubles began on December 27 2001, when she sold nearly 4,000 ImClone shares for $228,000. A day later ImClone announced that its cancer fighting drug Erbitux had been rejected for review by the Food & Drug Administration, news that wiped 18% off the value of the shares. Mr Waksal had tipped off family members and tried to sell his own stake on the 27th, which landed him in jail.

Ms Stewart, 62, and her Merrill Lynch broker, Peter Bacanovic, who also worked for Mr Waksal, maintain that she had a pre-arranged agreement to sell if the price fell below $60. Government prosecutors allege that she acted on inside information, selling after being told that the Waksal family was trying to offload shares. The broker is a co-defendant in the trial.

The case against them is not insider dealing. Rather the 42-page indictment alleges that the pair conspired to cover their tracks and lied to investigators from the US attorney's office, the securities and exchange commission and the FBI.

Ms Stewart is also being tried for securities fraud in her own company, Martha Stewart Living Omnimedia. Prosecutors allege that statements she made in public protesting her innocence, kept the share price of her company propped up. The negative publicity forced her to step down as chief executive of the firm, but she remains a director.

There are several pieces of evidence which the prosecution aims to introduce. The indictment alleges that Mr Bacanovic doctored a document after learning of the investigation into Ms Stewart's share sale, adding @60 to a reference to ImClone. The same colour ink was used but the indictment alleges that scientific analysis showed it was written with a different pen from other notes on the page, suggesting it was added at a later date.

Ms Stewart is also alleged to have altered her secretary's computer phone log, four days before being interviewed by officials. They claim she changed the entry from December 27 2001 to read: "Peter Bacanovic re ImClone" from "Peter Bacanovic thinks ImClone is going to start trading downward". She later changed it back.

In addition Ms Stewart claimed to have spoken to Mr Bacanovic only once between December and her interview with investigators on February 4 and that they had not discussed the case. Phone records suggest they spoke a number of times, including the morning of her interview.

The crucial government witness will be Mr Bacanovic's former assistant Douglas Faneuil whose version of events differs markedly. He claims that Mr Bacanovic told him to tip Ms Stewart off that the Waksal family was selling ImClone shares. Mr Faneuil says he was offered a week's holiday and a free flight to stay quiet when the investigation began.

The biggest imponderable is how much Ms Stewart's celebrity will affect the outcome. There are several precedents in America where juries have let famous people off when the evidence against them seemed compelling. She certainly has her fans. A website savemartha.com is planning to rally people outside the courtroom in lower Manhattan.

Ms Stewart's public relations team were apparently happy with the results of her turns on Barbara Walters and CNN. She did though make at least one gaffe which will do little to endear her to a jury. She said only $40,000 had been at stake in the original insider dealing allegations, noting that was only about 0.006% of her net worth. For a juror earning perhaps $40,000 per year, that kind of comment might rankle.