Martha Stewart Due Back in Court Tuesday

NEW YORK – Is Martha Stewart (search) a criminal who lied to the government about unloading stock on an inside tip, or simply a shrewd investor who saved money with a smart bet on the market?

The trial that will determine the answer -- not to mention whether the style guru does time in prison -- begins Tuesday, as lawyers begin narrowing down a jury pool to 12.

Stewart was due in Manhattan federal court for her first appearance at the closely watched celebrity trial, which grew from a 2001 stock sale in which the government estimates Stewart saved about $51,000 -- a tiny sum compared to her multimillion dollar media empire.

In a judge's private robing room, potential jurors were to face Stewart and answer questions from lawyers designed to detect any bias they may have.

Opening arguments will begin once jurors are seated -- possibly as early as this week.

The government says Stewart saved about $51,000 by selling stock in ImClone Systems (search) on Dec. 27, 2001 -- just before a negative government report about a highly touted ImClone cancer drug sent the stock plummeting.

Stewart says she sold because she and her broker, Peter Bacanovic (search) of Merrill Lynch & Co., had a pre-existing agreement to sell when the stock fell to $60. Bacanovic faces five counts of his own and will stand trial with her.

But the government says she was tipped that ImClone founder Sam Waksal -- a longtime friend of Stewart's who once dated her daughter -- was trying to unload his shares.

Legal experts say the case is near-impossible to predict, and should come down simply to whose account jurors believe.

Former Justice Department obstruction prosecutor George Newhouse, now a lawyer in private practice, said the case -- for sheer spectacle -- is something like a white-collar version of the murder trial of O.J. Simpson.

"This case is very interesting," he said. "You have the classic elements -- an incredibly high-celebrity, well-heeled client who has hired the A-team in terms of lawyers."

Former Merrill assistant Doug Faneuil, 28, is expected to testify that the government's account of the stock sale is accurate -- and that he was plied with gifts in exchange for initially supporting Stewart's version.

The government is also expected to produce as evidence a telephone message log of a call from Bacanovic that Stewart temporarily altered, and a worksheet the government says Bacanovic altered to make the $60 agreement seem legitimate.

But the defense presents a compelling argument as well: Why would Stewart, herself a former stockbroker, deliberately break the law and risk a fortune to save what was, for her, a small amount of money?

U.S. District Judge Miriam Goldman Cedarbaum has blocked the press and public from watching the juror-questioning process, saying she is worried jurors may be less forthcoming if they know reporters are present.

Instead, a transcript of each day's questioning will be released the following day.

Conviction on any of the five counts against her could land Stewart in federal prison -- doing untold damage to her reputation and her company, Martha Stewart Living Omnimedia, where she remains chief creative officer.

The five counts carry a total prison term of 30 years and a $1.25 million fine, but Stewart would likely get far less under federal sentencing guidelines if convicted.

The most serious count against her is securities fraud, alleging Stewart deliberately deceived her own shareholders by publicly saying in 2002 that she had done nothing wrong.

The defense has characterized the charge as an unprecedented infringement on a defendant's First Amendment rights, and even the judge in the case called the charge "novel."

But prosecutors say Stewart went further than simply predicting she would be exonerated, giving a "forceful, detailed and false explanation for her sale of ImClone."

The trial was relocated to a larger courtroom due to the anticipated crush of people expected. Fifty press passes were issued, including 10 for sketch artists, since no still cameras are allowed inside federal court.

By Monday morning, 24 hours before Stewart was to appear, an armada of satellite trucks had already staked out ground outside the federal courthouse in lower Manhattan.