Martha Stewart: Is Insider Trading All That Bad?

Since 2002 Martha Stewart was investigated by the SEC and the FBI for Inside Trading but it is interesting that she wasn’t found guilty or accused on any of those charges; she was charge for conspiracy, obstruction of justice and false statement. It was her un-ethical behavior what drove her into innumerable allegations and public embarrassments. There are at least four issues in this case where ethics play a very interesting and critical role; Freedom of speech, Conspiracy, Right of property and Inside trading.

On the morning of December 27th, 2001, the day before the FDA would make their announcement concerning Erbitux, Sam Waksal and another member of his family called Doug Feneuil to insist that he sell his ImClone shares. He then made the call to Peter Bacanovic, warning him that Sam Waksal was dumping his $7.3 million in ImClone shares. Within minutes of the call, Bacanovic went through desperate measures to reach Martha Stewart. However, Martha was onboard her private plane headed toward Cabo San Lucas, Mexico, so he contacted the next best person, Martha's secretary Ann Armstrong (Slater, 25). With Ann, he left possibly the most infamous 10 words of the entire case: "Peter Bacanovic thinks ImClone is going to start trading downward" (Slater 25). Officials later concluded that Stewart actually changed the wording in her phone log from "Peter Bacanovic thinks ImClone is going to start trading downward," to "Peter Bacanovic re Imclone [sic]", and then

SEC alleged that Mark Cuban violated misappropriate insider trading. To be qualified as misappropriate insider trading, an individual wrongfully obtains (misappropriates) inside information and trades on it for her or his personal benefit. In this case, Cuban actually traded his shares based on the material inside information he was told and saved him $750,000 in losses. Wrongful misappropriation means violation of a fiduciary duty.

Martha Stewart scandal was the topic of the century for several months because she received information to sell her shares of stock from a company called ImClone that went belly up before the information was even publicized. As a result of the rejection the company stock prices dropped drastically, but it did not hurt Stewart since she had already sold her stock from receiving inside information to do so, therefore was Martha Stewart guilty of removing her stock when it was not even publicized to the world.

Bethany McLean and Peter Elkind discuss the company Enron’s executives and how success made the executives lose touch with common decencies such as working alongside with women. This piece shows the imbalance with the treatment of sexes in the workplace and how money makes people insensitive to what is around them. The authors want to reach an audience of common people. They use the fall of Enron to warn about what happens when a business is lead with weak morals. McLean and Elkind shift the tone of the passages from exciting stories about the executives, to pointing out how the glitzy lifestyles are a façade to their collapsing business. This strategy makes the reader go from envy to concern about the priorities of the company.

She was found guilty of insider trading in 2003 and was convicted and sent to jail. She sold her shares of biopharmaceutical company ImClone Systems from a top that she got from Peter Bacanovic, a stock broker that worked at Merrill Lynch. He got the tip from chief officer Samuel Waksal, after he sold all of his shares in the company. This company was one that was working an a cancer treatment and was waiting for the FDA to get back to them to see if they would approve of their drug. Which they did not, causing the stock to drop 16% in one day. Since stewart sold her shares early, she was able to save around $45,673 bucks because of the information that wasn’t made public! She ended up doing a five month sentence with probation and house arrest. While Waksal, the CEO of the company, did seven

One of our most world-renowned business women and television personalities Martha Stewart decided to dip her feet into illegal insider trading. Martha served five months in a federal prison at Alderson in West Virginia and two additional years of supervised release after a portion in home confinement. Back in 2001, Martha Stewart sold all her shares from a biotech company she invested in called ImClone. Ironically, a few days after she sold her shares the company’s stock fell sixteen percent after they publicly announced that the FDA did not approve ImClone’s pharmaceutical product (Moffatt, 2017). With her selling her shares before the company went public and the subsequent drop in stock’s value, Martha avoided a $45,673 loss. In addition, she wasn’t the only one who benefitted from the quick sale. The CEO of ImClone, Sam Waskal, ordered to

Martha Stewart, founder and CEO of her own multimillion dollar corporation, Martha Stewart Living Omni media was indicted, on charges of lying to investigators, securities manipulation, and obstruction of justice. She was sentenced to five months in a West Virginia state woman’s prison and 5 months on house arrest. Originally it was said that Ms. Stewart was indicted on charges of insider trading, however obviously those charges could not be proven. After a year and a half investigation, she was indicted on totally different charges. Ms. Stewart’s stock broker at the time Mr. Bacanovic, who was employed at Merrill Lynch Investment Company, was also indicted on the same charges. Mr. Bacanovic had his assistant call and give Ms.

With the Martha Stewart scandal her actions initially saved her $45,673 but in the end did it really help? She ended up serving less than a year in prison and was fined $250,000. In hind sight she ended up losing a lot more money from selling the stocks and lying about it then if she would have just kept the stocks and took the hit when ImClone’s value fell. But selling stocks based on inside information so you’re sure you don’t lose money in an investment; doesn’t that seem like the right thing to do? No one ever wants to lose money especially in an investment, but avoiding a loss by selling stock the way Martha Stewart did is considered illegal. Having inside knowledge of a company and using that knowledge to make moves before the market price changes at that time probably seemed like a great idea but is profoundly illegal and known as inside trading. Martha Stewart was and is a well-known business woman and at that time served as President, CEO and chairwoman of her publicly traded company. She was educated and knowledgeable about what is allowed or not allowed as far as selling, buying and trading stocks. Her understanding of SEC regulations is especially disconcerting since she had been a part of the board of directors of the New York Stock Exchange. Martha was aware of the consequences that came with breaking the rules. Not only did she participate in insider trading and benefited from it but she also tried to cover it up claiming she and her stock broker

Mr. Jeffrey Skilling was one of three executives at Enron Corporation that were indicted for manipulating financials to show the public inflated numbers about Enron’s profitability. By showing these numbers to the public they were trying to mislead the public into thinking the company was more profitable than it really was. Mr. Jeffrey Skilling was convicted by a Texas federal district court of conspiracy, securities fraud, making false representations to auditors, and insider trading. Mr. Skilling had been the C.E.O. of Enron Corp. Mr. Skilling appealed, he argued he was prosecuted by the government under an invalid legal theory and that the jury he had was biased.

After reviewing the federal statue under 15 U.S.C. 78U-1 – civil penalties for insider trading, it provides clarity on why Martha Stewart was not charged with insider trading. On December 27, 20, 2004 Martha Stewart sold ImClone stock based on information she received from her stock broker who stated that the CEO of the company Sam Waksal was dumping his $5 million stake in the company. Stewart owed 4000 shares of ImClone, which was worth $45,673. Even though Stewart’s actions were somewhat suspicious, there was no proof that she knew that the FDA did not grant the approval for the drug Erbitux. She may have been friends with the CEO, but there was no proof of him contacting her or vice versa regarding the FDA decision; In order to charge Stewart

America’s most famous homemaker, Martha Stewart, is one of the business mavens involved in an insider trading scandal in the late 2001. Born in 1941 as Martha Kostyra, she developed a passion for gardening, cooking, and housekeeping at an early age. Her mother taught her the basics of baking, cooking, canning, and sewing while her father introduced her to gardening. She married Andrew Stewart while attending Barnard College in New York City. Martha started her career as a successful stockbroker on Wall Street. In order to satisfy her childhood passions, she left the stockbroker business and opened a gourmet food shop that became a catering business in Westport, Connecticut. She is the founder and former CEO of Martha Stewart Living Omnimedia, Inc., engaged with television, publishing, electronic commerce, merchandising, and related international partnerships. Stewart had an estimated net worth of $650 million prior to the insider trading scandal.

An objective look at the different arguments given by each side of the controversial topic of whether insider trading should continue to be illegal or not. Also included is a subjective view of the author’s stance on the subject.

     Martha Stewart, the countries top icon for homemaking has been in the eye of the public since June 2002, but not for her craftiness or culinary abilities. Stewart instead has the spotlight on her for crimes of insider trading. A tip from her former broker Peter E. Bacanovic, persuaded her into selling her IMClone stock after sharing information about a close friend of Stewart’s getting rid of his shares. Stewart’s companion, Sam Waksal, was also the chief executive of IMClone Systems Inc. IMClone Systems is a well-known company specializing in the research and development of therapies treatments of cancer. The stock selling was provoked due to a leak of information about The Food & Drug

In 2001, Martha Stewart was accused of illegal insider trading with the stock of ImClone