Political Science

On March 5, 2004, television host Martha Stewart was sentenced to five months of imprisonment and two years of supervised release for obstruction of justice, lying to federal investigators and conspiracy with broker Peter Bacanovic in connection with the alleged insider trading of ImClone shares on December 27, 2001.  However, the jury acquitted Stewart of insider trading as the prosecution team failed to negate that the stock sale was something agreed upon by her and Bacanovic long before the Waksals, the controlling shareholders of ImClone, sold their shares ahead of an unfavorable FDA ruling.  Stewarts actions may loosely amount to insider trading, but not beyond reasonable doubt. The seemingly contradictory verdicts of the jury underscore the incongruous operations of criminal law and ethics.  Had the defense team failed to provide the dubious document stipulating the stock price at which Steward had purportedly ordered ImClone shares to be sold, she would have been convicted of insider trading.

Apparently, the ethical issues surrounding the stock sale are bound to the verdict on the case. There is an overwhelming amount of evidence that Bacanovic relayed nonpublic information to Stewart on December 27.  However, if the debate is to focus on ethical issues, it would be wrong to cite insider trading as the defining theme, since the defense lawyers have raised a counter-evidence that prevented a guilty verdict beyond reasonable doubt (Heminway, 2005).  Ethical questions should rather focus on Stewarts attempts to hide her knowledge of Waksals transactions, not on her selling of ImClone stocks for this issue has been settled already in favor of her.  She may not be guilty of insider trading owing to her pre-existing sale order, but her attempt to hide her knowledge of Waksals transactions is a separate legal and ethical issue.  She was basically imprisoned not because of securities fraud but because of such misrepresentation during federal investigations.