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Martha Stewart Case

In: Business and Management

Submitted By hwang49
Words 572
Pages 3
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Martha Stewart Case
May 9, 2012

What were some of Martha Stewart’s illegal or unethical actions? What made her take these controversial actions? What would you have done if you had received a similar call from your broker? When Martha Stewart knew “ImClone is going to start trading downward”, which is the nonpublic information, from Bacanovic’s phone message, she tried to connect with Sam Waksal to learn more information and then, she sold all her ImClone shares. This should be a kind of illegal insider trading. During the period that Stewart and Bacanovic were interviewed by SEC, FBI, and U.S. Attorney’s Office, they had unrecorded meeting and Bacanovic changed worksheet. Stewart denied knowing the message from Bacanovic even though she just changed the content of the message. She declared that she did not know any nonpublic information at the time. And she told a lie that she had a preexisting agreement to sell ImClone’s shares if the price fell below $60 a share. She tried to deny her illegal insider trading misdeed and conspired with Bacanovic to conceal evidence for covering the truth. The actions cheated the government attorneys to hamper their investigation. And she had made a series of false statements about her innocence to mislead investors and prop up her company’s share price. During the trial, the lead prosecutor Karen Patton Seymour argued that Stewart’s motive is “a desire to protect her ‘multimillion dollar business empire’”. She pointed out that every $1 decline in the price of Martha Stewart’s company decreased her net worth by $30 million. Because of the reject from the FDA to ImClone’s new drug, the ImClone’s share price would decline dramatically when the reject letter was published. Actually, in the case, at the beginning, the share price is about $61.53 a share, and then it dropped to $55.25 a share, and

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