The charges of securities against Martha were thrown away, she was still found guilty of four counts of obstruction of justice and lying to the key investigators. She was sentence to five months of prison, two years of probation and five months of house arrest.
Stewart had owned 4, shares of ImClone. However, that trade would end up being one of the defining actions of her career — and the one that landed her in a federal prison.
For regulators, catching Waksal for insider trading was simple. To do that, the government would have show Stewart traded while in possession of information that was nonpublic and material — something that is not widely known and that a regular investor would consider important in making a decision about a trade.
There was another link between Stewart and Waksal. They shared the same broker at Merrill Lynch, Peter Bacanovic. Although neither Bacanovic nor his assistant, Doug Faneuil, knew about the Erbitux decision, both knew that Waksal was trying to dump his stock.
And they warned Stewart about it. That Stewart knew Waksal was selling his stock but not the reason behind the sale complicated the insider trading case against her.
Knowing about the FDA decision would qualify as nonpublic and material. For the SEC, the answer was yes. For the SEC to build an insider trading case against Stewart, it also would have to show that her transaction violated some duty to refrain from trading on the information in question.
Stewart did not have such a duty herself. She had merely traded on a tip. Instead, it focused its case on the lies she told to cover the trade.
Bacanovic corroborated the story, but his assistant Faneuil eventually came forward and revealed the truth, furthering the case against Stewart. The defense argued that Stewart was too rich to worry about a few thousand dollars and that she and Bacanovic were too smart and sophisticated to make such obvious mistakes and get caught, but that argument failed to convince the jury.
Bacanovic was also found guilty on all charges, except forging a document as proof of the stop-loss agreement he had claimed to have with Stewart. It could have been worse. Securities fraud carries penalties of up to 20 years in jail.
Stewart was fortunate the judge dismissed those charges. Insider trading, the charge ultimately dropped by the government, also carries a maximum penalty of 20 years in prison. With so much evidence and a jury so convinced of the guilt of the defendants, it is not clear why the government did not charge Stewart with insider trading.
The government had proven Stewart had material, nonpublic information about the company and that she had traded her Imclone shares based on that information. The government had also made the case that Stewart knew she was doing something wrong.
Second, she would not have had a reason to lie if she thought it was a cookie-cutter trade. One reason the government may have backed off is that the U.
The extra media attention also could have helped Stewart dodge the extra charge. Stewart was an A-list celebrity, and the trial would be highly publicized and scrutinized. Although the Justice Department decided not to charge Stewart with insider trading, the SEC pursued a case against her.
At the time, Stephen M. Although she made a comeback after her prison term, her incarceration remains a stain on her illustrious career. And had she been charged with insider trading and not just covering it up, the stain could have been much worse.
For Sam Waksal, an insider trading conviction meant seven years in prison. Never lie to the U. This entry was posted on Tuesday, May 15th, at 3: You can follow any responses to this entry through the RSS 2.Martha Stewart Living sharpens their senses to the world around them, trains them to see the potential of beauty in their surroundings, and helps them establish a distinctive signature style to enhance their world” (Martha Stewart Living Omnimedia, Inc., ).
Scandals: Martha Stewart and the ImClone Insider Trading Deal A very famous scandal that has embedded ourselves in our history is the Martha Stewart scandal of Martha Stewart is a true success story of the American dream in effect.
BibMe Free Bibliography & Citation Maker - MLA, APA, Chicago, Harvard. Social Justice Education for Teachers, Carlos Alberto Torres, Pedro Noguera My First Wheel Book of Animals, Robert Salanitro The Day of the Confederacy, Nathaniel W. Stephenson Burrows, Therese Hopkins La Economia Regional En El .
What Martha Stewart Did Wrong. By Covering Business May 15, it is not clear why the government did not charge Stewart with insider trading. The government had proven Stewart had material, nonpublic information about the company and that .
A look back at the esteemed personalities who left us this year, who'd touched us with their innovation, creativity and humanity. By timberdesignmag.com senior producer David Morgan.