Tag: Martha Stewart

Doug Henwood joins the libertarian-minded folks in wondering why Martha Stewart is being prosecuted for essentially asserting her innocence of insider trading charges. Henwood writes,

They also claim that aside from trying to exculpate herself, Martha also designed her alibi to prop up the stock price of her company, Martha Stewart Living Omnimedia, since her being packed off to jail would almost certainly damage the firm severely. That, to the prosecutors, was securities fraud. So even though the circumstances of the original sale were probably not criminal, it may be that Stewart thought they were, and made up the $60 story as a self-defense. Should bad judgment be a felony?

Or to steal a line from Clinton supporters, it was just a lie about money!

Or, as a sign from one of Martha’s supporters outside the court room put it, if the trade was legit, you must acquit!

Source:

Free Martha!. Doug Henwood, The Nation, January 20, 2004.

Reason is the only magazine that I actually go out and buy even though I usually read all of the content first on their web site. Why? Because of excellent stories like Michael McMenamin’s St. Martha: Why Martha Stewart should go to heaven and the SEC
should go to hell.

Like many other libertarian-oriented folks, McMenamin argues that insider trading should not really be a crime in the first place — or, if it is to be a crime, the govenment should at least be required to define exactly what constitutes insider trading.

But you don’t have to go that far to realize there’s something a bit odd about the prosecution of Stewart. After all, the feds decided not to bring criminal charges of insider trading against Stewart (although it is pressing a civil case on those charges). Instead, the most serious criminal charge she faces is for saying publicly that she was not guilty of violating insider trading laws.

Yes, you read that right — Stewart is being prosecuted for saying she was innocent of a crime for which she was never charged. Welcome to the vagaries of securities law! As McMenamin writes,

The most serious criminal charge against her is not perjury or insider trading but securities fraud, based on the fact that she denied to the press, personally and through her lawyers, that she had engaged in insider trading. This was done, the feds say, not for the purpose of clearing her name, but only to prop up the stock price of her own publicly traded company, Martha Stewart Living Omnimedia. In other words, her crime is claiming to be innocent of a crime with which she was never charged.

As for the SECÂ’s civil case, it hinges on an elastic understanding of insider trading, an offense Congress has never defined. The justification for the ban on insider trading, which makes little economic or legal sense, is just as murky as the behavior covered by it. Given the difficulty of figuring out exactly what constitutes insider trading (let alone why itÂ’s illegal), it is entirely possible that Stewart and her lawyers werenÂ’t sure whether she had broken the rules. In any event, under existing case law, itÂ’s clear that she didnÂ’t.

McMenamin also goes in-depth about the heavy handed way in which Stewart is being treated compared to the relatively light treatment of other defendants who clearly engaged in more clearcut cases of large-scale insider trading.

Source:

St. Martha: Why Martha Stewart should go to heaven and the SEC
should go to hell. Michael McMenamin, Reason, October 2003.