Martha Stewart's Lawyers Urge Probe of Leaks

NEW YORK – Lawyers for Martha Stewart (search) on Monday asked a federal judge to order an investigation of possible leaks to the media in the obstruction of justice case against the lifestyle trend-setter.

Stewart's lawyers said during a hearing in federal court that the U.S. government should conduct a probe of the U.S. Attorney's office, the FBI, the Securities and Exchange Commission and the Justice Department to determine the source of possible leaks to the press about the case.

At issue is whether someone with knowledge of the case gave information to the media about what would be included in the June 4 indictment of Stewart, 61, known for having turned a small catering outfit into a multimillion-dollar media and home-decorating business.

"What the media was informed of prior to the indictment was the nature of the indictment," Stewart's attorney, Robert Morvillo, told the federal judge overseeing the case. As a result, he said, "the court should instruct the U.S. Attorney's office to conduct an investigation."

In a nine-count criminal indictment, the government charged that Stewart and her former stockbroker, Peter Bacanovic (search), interfered with the investigation into the suspicious timing of her ImClone Systems Inc. (IMCL) stock sale.

Stewart has pleaded not guilty to the criminal charges. She has resigned her positions as chairman and chief executive of Martha Stewart Living Omnimedia Inc. (MSO) and is due to head to trial in January.

The government's indictment said Stewart and Bacanovic, who was a broker with Merrill Lynch & Co., conspired to "fabricate and attempt to deceive investigators with a fictitious explanation for her sale."

Stewart did not appear in court on Monday, but her attorney, Morvillo, said afterward that his client was "doing "fine" and "very much aware of all aspects of the case."

During the hearing, Morvillo cited media reports from June 3, the day before the indictment was handed down, that said charges against Stewart would not include insider trading, which was indeed the case.

He told U.S. District Judge Miriam Goldman Cedarbaum that he did not believe the press was given confidential information by the U.S. Attorney's office, but said it could have come from other governmental agencies such as the FBI or SEC.

Judge Cedarbaum did not rule on the motion, but said investigations of leaks to the media were typically ordered only if there are concerns the information reported by the media could be prejudicial.

"Do I think there was potential prejudice?" Morvillo responded. "Yes, I do."

Lawyers from the U.S. attorney's office argued that if there were leaks, they could have come from the defense lawyers. They pointed out that some news reports even cited Stewart's lawyers as sources.

"This is a red herring," Morvillo responded. "The government, I think, is concerned that if they conduct an investigation it will come to their doorstep."

Judge Cedarbaum said she would rule on whether to order an investigation once she is given a transcript of instructions presented to the grand jury about press reports.