...PROSECUTING MARTHA STEWART: THE OVERVIEW; Martha Stewart Indicted by U.S. On Obstruction By CONSTANCE L. HAYS Published: June 05, 2003 Martha Stewart was indicted yesterday on charges of conspiracy, obstruction of justice and securities fraud, all linked to a personal stock trade she made in 2001. She pleaded not guilty and pledged to fight the charges. Hours after her arraignment in federal district court in Manhattan, the media and merchandising company she founded, Martha Stewart Living Omnimedia, announced that she was stepping down as chairwoman and chief executive. She will continue as a director and is expected to remain a force as the company's ''chief creative officer.'' [Page C1.] The indictment depicted Ms. Stewart as going out of her way to conceal the circumstances of the sale of nearly 4,000 shares of ImClone Systems, a transaction that investigators say she made after learning that her friend, Samuel D. Waksal, the company's founder, and his daughter were selling their own stock. Indeed, the charges focused less on the trade than on an elaborate cover-up that prosecutors say came afterward. According to the indictment, Ms. Stewart lied to investigators by telling them that she and her stockbroker had previously agreed to sell the shares if their market value fell below a certain price, and altered a phone message from the broker in her assistant's computer ''immediately following a lengthy conversation with her attorney.'' At a news conference announcing...
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...The Martha Stewart Case Professor Beverly H. Lee | AbstractThis is a brief synopsis into the life of Martha Stewart and the legal fortunes or misfortunes of Martha Stewart. We will delve into the various stages in her life and the outcome of the events that transpire in her life. By: Paul Cumberbatch BUSA 2106-200 | Fraud, lying, conspiracy...not terms that any individual generally wants associated with their history, nevertheless with their reputation and personality; even if that individual happens to be Martha Stewart. Her name pronounces itself across cookbooks, magazines and even has its own show on Style and The Learning Channel. It now pronounces itself with yet another captivating theme, as part of one of America's major scandals. As a well-respected author of books on cooking, entertaining and decorating she rose to prominence. It was also due to the expansion of her brand name by means of magazine and television show, and serving as CEO of the Martha Stewart Omnimedia. However; as it would come as an ironic coincidence that she would have to go to court which subsequently led to Ms. Stewart’s resignation from her post as CEO amid allegations of insider trading in 2002. Martha Stewart was born on August 3, 1971 as Martha Kostyra in New Jersey. She was the second of six children as she grew up in Nutley, New Jersey. By Age 13 she was working a model, making appearance in fashion shows, television and printed advertisements. As time went along she began attending...
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...on the organization as well as the individual. It will indicate the sentence imposed in regards to committing Business fraud. The (SEC) U.S. Securities and Exchange Commission reported that Martha Stewart did on 27 Dec 2001 receive private information from an employee at Merrill Lynch. This information was used to save her from taking a loss in the stock market. Based on this private information She sold her shares in the ImClone System. By selling all her shares she was able to save $45,673 dollars. It was reported that the day after she sold her stocks the stock market value for ImClone fell 16%. The back lash from this illegal action came to light in the following months. Stewarts reputation suffered. The media had a field day with the information that she had received unpublicized information from her broker at Merrill Lynch. There were several articles headlining this information i.e. Newsweek had a cover indicating “Martha’s Mess”. She went on CBS and was literally grilled by Jane Clayson anchor at that time. During this time she was serving on the New York Stock Exchange as one of the board of directors. As of October of 2002, She had held that position for only four month’s but was forced to resign due to the controversy (BBC,October 4, 2002). Stewarts actions were not only unethical but they were illegal. In June 2003, she was indicted on charges of obstruction of justice (lieing to federal agents), she received 9 counts one of which was securities...
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...Q1: For $45673, a very public figure ruined her image. Why? In my view, she cares her personal money and benefits more than the ethics and laws in stock market. By using the insider information, she could sell the stock of ImClone Company before the FDA announcement and avoid a net loss of $45,673, which is a tiny fraction of her net worth. The action of using insider information is unethical and illegal. At the same time, she lied and provided false statements to the authorities about the ImClone stock trades. I think she knew she was doing something wrong, but still made lies and wrong actions for the money. Martha Stewart had built a media empire based on presenting things in a proper manner, however, her illegal actions destroyed her good...
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...Martha Stewart To me, Martha Stewart is a television profile, a happy woman I saw on food shows when I was younger, someone that you'd think is the most genuine person you’ve ever seen on your screen at home while sitting comfortably on your couch wishing you could taste the delicious food or cakes she made. Not to make a general statement and say that everyone with higher status in the society has a bad side, but this woman is someone I would never assume to be a white collar criminal. She is born in New Jersey has Polish background and is at the end of the summer turning 75 years old, she has 5 siblings. She, just as any normal child from a middle-class family started working as a nanny when she was 10 years old. While every other 15 year...
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...Case Analysis Martha Stewart takes on time Summary of the case 1. Some important vocabularies in the case * Franchise- Formal permission given by a company to somebody who wants to sell its goods or service in a particular area. * Retreat- A period of time when somebody stops his/her usual activities and goes to quiet place for prayer and thought an organization event when people can do this. * PIE - A share of money, profits etc. * Stake- Money that somebody invests in a company. - An important part or share in a business plan etc. that is important to you and that you want to be successful. * Division –A large and important unit or section of an organization. * Lavish –Large in amount or impressive and usually costing a lot of money * Threaten -To say that you will cause trouble hurt somebody etc. if you don’t get what you want. * Buyout - A situation in which a person or group gains control of company by buying all or most of its shares. * Backer - A person or company that gives support to somebody, especially financial support * IPO - Initial Public Offering (the act of scaling shares in a company for the first time). 2. Background a) About Time Warner * Time Warner is a very large U.S media and entertainment company selling magazines films television programmers and internet...
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...include CEO’s, executives, and directors that are exposed to the information. Insiders that also may have to keep quit consist of Accountants and Investment Bankers. According to the article by Reem Heakal, "In the second part of Rule 10b5-2, the SEC has outlined three nonexclusive instances that call for a duty of trust or confidentiality: (1) when a person expresses his or her agreement to maintain confidentiality, (2) when history, pattern and/or practice show that a relationship has mutual confidentiality and (3) when a person hears information from a spouse, parent, child or sibling (unless it can be proven that such a relationship has not and does not give rise to confidentiality)" (Reem Heakal). It all began about a year after Martha Stewart sold 3,928 ImClone shares in late 2001 a day before a rigid slow down sent the stock tumbling. The stock market world was waiting for the FDA to make a decision on Erbitux. The pharmaceutical company...
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...Case Study: The Trial of Martha Stewart The United States of America is one of the few western countries which has no clear definitions for “insider”, “insider information”, and “insider trading” in its law system. Therefore, people are sending to prisons for a crime that has not defined yet. It is part of a due process that people have notice of what they are doing is wrong. Martha Stewart was sent to prison, because she sold her ImClone shares as a result of receiving tip from her broker on December 27, 2001. Bacanovic, Stewart’s broker, had routine access to the material, non-public information inside of ImClone which made him an insider. The argument here is whether Martha Stewart is an insider or not? Is receiving a tip makes her an insider? The same way, Sam Waksal, the CEO of ImClone, tipped his family members, an investment advisor, and a physician to sell their shares. However, none of the tippees was convicted with the insider trading crime, except for Martha Stewart. Martha Stewart was not holding any position in ImClone, nor had any routine access to the ImClone’s material, non-public information. Thus, how can she be possibly considered as an insider? It is very brutal to be convicted of a crime which has not been clearly defined in the law system, yet. The criticism here was that Martha Stewart was being used as a scapegoat, a victim. She could easily serve as an example of a high visibility celebrity who committed the insider trading crime. Also, it could be...
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...Aretha Jackson, president of a private investment firm received a call from a client asking for her advice whether to invest in Martha Stewart Living Omnimedia (MSLO). Jackson emailed Kate Prescott, director of Research, and asked her to prepared reports for her which will help Jackson assess the risks of investing in MSLO. Prescott delivered three reports to Jackson: one on the MSLO business model, one concerning the company’s core competitors, and one detailing consumer attitudes and behaviors (Herman, 2002). These three reports provided Jackson a complete overview on MSLO and it’s up to her to decide whether it’s favorable to invest in MSLO or not. The MSLO business model report mentioned that on October 19, 1999, MSLO went public. At the close of business day, MSLO reached a market value of $1.73 billion and a stake for Stewart worth $1.21 billion. MSLO described itself as a branded and highly integrated content company dedicated to helping people improve the quality of living in and around the home. MSLO produced original how to information and related product in seven core content areas such as home, cooking and entertaining, gardening, craft, holidays, keeping, and weddings. According to 60 Minutes, Stewart sold “that most indefinable and ambiguous of all products.” MSLO keys areas of strengths were in publishing, television, merchandising, internet and ecommerce (Neal, 2007). The company’s core competitor report defined MSLO’s competition based upon major and...
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...successful business women in America, Martha Stewart has been recognized for her successful business ventures in broadcasting, merchandising, publishing as well as a spokeswoman. Martha Stewart is a self-made entrepreneur with a fixation for money and never having enough. Stewart is a relentless workaholic who wished to earn every penny possible. Martha Stewart was known to be rude, profane, impatient and self-centered. Her coworkers had witnessed her fits of anger and never heard her apologize or admit she was wrong. Her stubborn compulsive and greedy personality is what would eventually lead to the downfall and public scrutiny of Martha Stewart. Martha Stewart was bashed by numerous media outlets for selling nearly 4,000 shares of ImClone right before the stock took a devastating drop in the price per share. Stewart was the topic of conversation as media headlines brought serious attention to the questionable stock trade. Headlines such as “Martha’s Prison Everyday Collection” from the New York Post and other negative publicity aroused from big name media sources. All this negative publicity destroyed Martha Stewart and her image however it came as a relief to Douglas Faneuil the stockbrocker’s assistant who played a crucial role in the ImClone trade. “In many ways, the intense press coverage and public mention of Stewart’s involvement came as a relief to Faneuil. He didn’t feel so alone. It wasn’t just him against Peter and Martha. This thing was much bigger. Even Congress...
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...Martha Stewart Martha Stewart is an author, editor, and a homemaking advocate. Over the last two decades Stewart has held a prominent position in the American publishing industry. She was the author of several books, hundreds of articles on the domestic arts, editor of a national homekeeping magazine, host for two popular daytime television programs, and commercial spokeswoman for K-Mart (Wikipedia). At the height of her career, Stewart’s success came to an abrupt hault as she encountered many hardships that were responsible for her undesireable reputation and diminished trust in the business world. In December 2001 Stewart held 3,928 shares in ImClone, a New York-based biotech firm. On the morning of December 27, Aliza Waksal, the daughter of the firm's CEO, Sam Waksal, told Douglas Faneuil, the assistant to Stewart’s Merrill Lynch broker, Peter Bacanovic, to sell the ImClone shares in her account. Soon after, Sam Waksal's accountant tried to sell Sam's shares as well. Faneuil told Bacanovic about the Waksals' desire to sell, and Bacanovic quickly called Stewart, leaving a message that ImClone's stock was going to start trading downward. Stewart sold her ImClone shares on the afternoon of the 27th. The following day, December 28th, The Food and Drug Administration reported publicly that ImClone’s promising cancer drug Erbitux was not going to be approved. After the announcement, ImClone’s stock fell sharply and Martha Stewart saved around $45,000 by selling early (Henwood)...
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...Throughout the case study on Martha Stewart, evidence provided illustrates how public relations can alter the image of a national personality in both negative and positive lights. In particular, the case illustrates how Stewart’s initially poor public relations responses tarnished her image and, only after changing her tactics, did she actually work toward correcting the problem. Ultimately, the Martha Stewart case is pivotal in illustrating how the power of public relations, if used correctly, can revamp a person’s public portrait----even if formal charges of criminal activity exist. Martha Stewart, a “model student” and iconic legend of the kitchen, has been world renown for her success and outspokenness in the past; however, upon receiving allegations of insider trading, Stewart actually became a ‘silent diva’ by inevitably isolating herself from all media and society (Seitel, 17-18). Although this initial public relations response helped Martha avoid responding to the pressing questions from the media, I believe that her silence was counterintuitive to proving her innocence in the sense that her natural personality was “typically feisty” (18). Using logical thinking, most Americans accused of a crime that they were not responsible for would protest, appeal, and flat out become outraged----actions that an already “feisty” Stewart surely would have carried out had she truly believed in her innocence. By remaining silent and withdrawing from her daily life on talk...
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...Introduction Martha Stewart was indicted on charges of conspiracy, obstruction of justice and securities fraud. All linked to her sale of 3,928 ImClone Systems Inc shares on December 27, which considered as illegal insider trading by Security and Exchange Commision (S.E.C). Stewart cashed out her ImClone stake at an average price of $58.43, collecting about $229,500. After the market closed the following day, the Food and Drug Administration announced its refusal to review ImClone's application for Erbitux, a promising cancer drug. The next trading day, Dec. 31, ImClone's shares opened at $45.39 per share. That difference in price would have cost Stewart about $51,200 if she sold first thing that morning. However, she was not prosecuted for insider trading, which was the original focus of the government's investigation. She pleaded not guilty and pledged to fight the charges. Although the charges of securities fraud were thrown out, Stewart was found guilty of four counts of obstruction of justice and lying to investigators. She was sentenced to five months of prison, five months of house arrest, and two years of probation. ImClone case was showing unethical and socially irresponsible behavior by business executives. They are in positions of power that allow them to do damage to others. This paper will evaluate the case above thoroughly, start from the prosecution’s arguments, the defense’s arguments. Analysis will be made using four ethical theories; Rights, Justice, Utilitarianism...
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...HBS Martha Steward Case Assignment Questions 1. In what ways did Stewart’s control of shareholder voting rights disrupt the functioning of the board? How did her control of the board interfere with directors’ carrying out their fiduciary duties? Stewart highly influenced and controlled all aspects of the company and board of directors. Because Stewart was the founder, major shareholder, and the face of the company it was difficult to bypass her demands and have a fully functional board. The name of the company itself was Martha Steward Living Omnimedia and at the end of the day the firm was founded on her image and work. On top of that, having over 90% of the shareholder voting rights and a big ego proved to be detrimental to the company’s well being. No matter what the board would advise or how good the vision of new CEO’s were she would always decline their plans and eventually make them resign. Furthermore, she appointed most of the board members. Just to name a few people, CEO Sharon Patrick was someone she met on a hiking trip to Kilimanjaro, Frederic Fekkai on the board was Martha’s hairdresser, Charlotte Beers and Michael Goldstein were also appointed by Martha. By her having the most control and appointing a board that back her up no matter what left many executives who wanted to make changes with their hands tied. 2. What changes in the makeup of the board would have improved governance? Had there been a more diverse group that was searched for by third...
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...Martha Stewart’s initial public relations response to the charges against her was basically to lie in the background and keep everything hush for as long as they could. Martha Stewart did not speak to the public about the alleged charges she was being faced with, so she was having people she paid very well to speak for her. Stewart denied being guilty, and claimed she had done nothing wrong. The public or society became wary of her, and after the courts convicted her of being guilty, she began to look like a liar her consumers and just about to anyone else. Stewart not only still refused to really give the public an explanation, she also still refused that she was guilty of doing anything wrong. After the media coverage had been taken nationwide, Stewart still insisted that her attorney still to be the one speaking to the public. This article explained that Stewart would not make eye contact nor speak to the media reporters. Her attorney spoke for her, and Martha Stewart’s public relations initial response was to let the legal attorney do the talking. I believe the key public relations principle that Martha Stewart violated was not personally addressing the issue of the charges or accusations she was being initially accused and eventually convicted of. She did not give her consumers and stockholders an explanation for anything. After she was convicted, she never apologized for anything. She was found guilty and she still addressed the public only electronically...
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