NEW YORK - A federal judge dealt a blow Friday to the government's effort to prove Martha Stewart committed securities fraud when she publicly proclaimed her innocence amid a stock sale investigation.
U.S. District Judge Miriam Goldman Cedarbaum blocked expert testimony on whether investors in Stewart's homemaking empire would have considered her public statements about her ImClone Systems Inc. sale important.
The securities fraud count, the most serious one against Stewart, accuses her of propping up the stock price of Martha Stewart Living Omnimedia Inc. by saying in 2002 that her ImClone sale was proper and that she was cooperating with authorities.
Cedarbaum's ruling granted a motion by Stewart to block expert testimony on the "materiality" of Stewart's statements about the ImClone investigation.
The ruling, issued before jurors were in the courtroom, blocks prosecutors from introducing stock research reports or calling stock analysts as witnesses to testify to the effect Stewart's statements had on the stock price, her attorneys said.
"I think it's potentially very significant," Stewart spokesman George Sard said.
Stewart is accused of lying to investigators about why she dumped 3,928 shares of ImClone on Dec. 27, 2001, just before it plunged on negative news about its experimental cancer drug.
IMCLONE SHARES SOAR: Shares of ImClone Systems Inc. leapt nearly 29 percent Friday after news that the company's colorectal cancer drug Erbitux had won regulatory approval.
The Food and Drug Administration approved the drug Thursday as a last-ditch effort for patients no longer responding to standard chemotherapy. Doctors think roughly 20,000 patients a year might benefit from Erbitux.
ImClone shares rose $9.79, closing Friday at $43.79.
KMART WANTS TO CUT PAYMENTS: Kmart Corp. is accusing Martha Stewart's company of overcharging it for the exclusive rights to sell housewares and other products bearing the domestic maven's name.
Martha Stewart Living Omnimedia Inc. said Friday that Kmart's interpretation of the contract would cut what it gets from Kmart by millions of dollars and that it would contest Kmart's court filing.