Martha Trial Jury Selection Begins

Is Martha Stewart 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.

Those potential panelists not excluded after filling out jury questionnaires will show up at District Court in Manhattan to be questioned by attorneys in the judge's private robing room, reports CBS News Correspondent Cami McCormick. The jury could be seated as early as this week, followed by opening arguments.

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.

Tuesday could be crucial to the case, says CBSNews.com Legal Analyst Andrew Cohen.

"I really do think that this case will be won or lost during jury selection," he said. "There are going to be a lot of questions about folks who watch her show, who buy her products, who play the stock market."

The government says Stewart saved about $51,000 by selling stock in ImClone Systems 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 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 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?

When her company went public, her value ballooned to more than a billion dollars, reports CBS News Early Show National Correspondent Jon Frankel. But when she sold her ImClone stock under a cloud of suspicion for around a $50 thousand profit, a small sum for her, it threatened her entire media empire.

"She makes one phone call and to date I think she's lost over half a billion dollars of her net worth," said author Alex Prud'homme, whose book "The Cell Game" chronicles the ImClone meltdown.

"Martha Stewart is very polarizing and her lawyers are going to have to try to find people who will be sympathetic," he said. "It won't be easy."

"Some of them will have preconceived notions about Martha Stewart and the trick will be for the judge and the lawyers to try to winnow out those folks from folks who might be more objective," agrees Cohen.

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 trial was relocated to a larger courtroom due to the anticipated crush of people expected.

Stewart has her supporters, such as marketing consultant John Small, who says he started saveMartha.com because the domestic diva has become a punching bag.

"Martha is not the Godfather or Osama bin Laden," he told CBS News Correspondent Peter King. "Jay Leno and David Letterman have had way too much fun at Martha's expense."

On his site, he's selling t-shirts and aprons with slogans like "If her stock sale was legit you must acquit" and "She didn't do the crime but she sure can do the thyme."

But in all seriousness, he opens the public will give a fair hearing to what he calls "a tempest in a Cuisinart."