US style queen pleads innocent at start of fraud trial

Martha Stewart, America's reigning arbiter of good taste, walked into a federal court in downtown Manhattan yesterday to face the trial for which she and a team of highly paid advisers have been preparing for months.

She will emerge at its end either as a criminal or as an acquitted victim of over-zealous government prosecutors.

Ms Stewart is charged with obstruction of justice, securities fraud and conspiracy. If found guilty, she could be sent to prison for 10 years and fined $2m (£1.1m). A criminal conviction would also leave her reputation in tatters and cripple her television broadcasting and magazine publishing empire, Martha Stewart Living Omnimedia.

"Not guilty," she responded softly as a federal judge read each of the five counts.

Prosecutors will assert that Ms Stewart lied when questioned about the sale she made of shares she held in a bio-tech company, ImClone, on 27 December 2001, just before news broke that the government was to withhold approval of a promising new anti-cancer drug it had been developing. The prosecution also alleges that Ms Stewart altered records to cover up her real motivation for the sale.

Ms Stewart will claim that she had a standing arrangement with her broker to sell the shares as soon as they fell below a certain level.

But the government believes she was tipped off about the impending bad news. She was a close friend of the former owner of the company, Sam Waksal, who also benefited from prior word of the government's negative notice. He was convicted last year of insider trading and jailed for seven years. One hopeful note for Ms Stewart came during a recent poll suggesting that only 27 per cent of Americans would find her guilty.

"She has a fighting chance," said Phillip Anthony of DecisionQuest, which carried out the survey. "Compared to other data we have collected about other important trials around the country, this data appears more encouraging for her."

Expected to last six weeks, the trial opened yesterday with both sides participating in jury selection.

It did not happen in open court but in the robing room of the judge, beyond the gaze of the press and the public. Such restrictions are normally reserved for terrorists or very violent defendants. Ms Stewart is special, however, simply because, in America at least, she is terribly famous.

Few defendants in history have gone such lengths to get ready for trial. Her lawyers over recent months have hired all manner of experts, including psychologists, to assess what kind of jury would be most likely to sympathise with the star.

There is even a website, www.marthatalks.com, dedicated to detailing her side of the story. Observers believe Ms Stewart has been spending up to $400,000 a month getting herself prepared. Whether her labours will pay off is anyone's guess.

What is extraordinary about the case - and this is what Ms Stewart's lawyers will attempt to underline - is that by selling the shares just in time, she saved herself only $51,000, which is a minuscule sum beside her accumulated personal wealth, believed to be more than half a billion dollars.

Why would she risk all for such a puny sum? It may be several more days before testimony begins because jury selection promises to be so difficult.

The difficulty is obvious: how to find jurors who are not familiar with Ms Stewart, with her reputation and with media coverage of the case. Jurors without prior bias for or against her will be hard to find.

"This case is very interesting," said a former justice department prosecutor, George Newhouse. He said it would resemble a white-collar version of the O J Simpson trial. "You have the classic elements: an incredibly high-celebrity, well-heeled client who has hired the A-Team in terms of lawyers."