Martha: She Made the Mistake of Being a Self-Made Billionaire

Ludwig von Mises Institute ^ | Posted March 6, 2004 | William L. Anderson and Candice E. Jackson

[g_f_axelsen]

The Martha verdict appears quite popular with the political classes and the vaunted "man on the street," not to mention the nation's mainstream journalists.  The post-trial comments of one juror, Chappell Hartridge (Juror Number Eight), say it all: "Maybe this is a victory for the little guys who lose money thanks to these kinds of transactions. Maybe it's a message to the big wigs."

Remember that this was not a trial about "insider trading."  The judge said so, the prosecutors said so, the pundits said so.  Even the New York Times declared that it was not an "insider trading" charge.  Crowed the Gray Lady's March 6 lead editorial:

Absent a straightforward insider-trading charge, the jury was left to determine that there had been an illegal cover-up — and on that, the evidence was compelling — without defining the underlying impropriety. Still, the narrative that emerged at the trial justified the government's determination.

Juror Number Eight even admitted as such, answering a reporter's question with: "Well, as I understood it we weren't supposed to consider insider trading."  So there we have it; it was a trial about "cover-ups" and changed stories and a conspiracy to tell the government investigators something that the government did not want to hear.

Yet, in reality, it was a trial about "insider trading."  If we dig even deeper, we find that underlying the entire event was the theme that Stewart's station in life somehow was illegitimate, or at least she had no right to the alleged position of privilege that her money brings her.  Should Juror Number Eight's words, as well as those of the editorial board of the New York Times mean anything, Martha Stewart ultimately was convicted of being "wealthy beyond a reasonable doubt."

Consider the following statement in the Times' editorial: "The trial depicted a cozy world where insiders routinely use their wealth and connections to benefit from insider information."  Having followed the trial in some detail, I cannot recall such a scenario.  In the aftermath (and even before the trial began), people were aware that ImClone CEO Sam Waksal sold his stock upon learning that the Food and Drug Administration had given a thumbs down on its drug Erbitux (a decision that the FDA later reversed, yet another sordid episode to this story of government overreaching).

According to the government's charges, Stewart's stockbroker, Peter Bacanovic, was also Waksal's broker, and he got a message to Stewart that his client was dumping his ImClone stock and that she should do the same.  As James Ostrowski has pointed out, that is not insider trading.  If Baconovic tipped off Stewart to Waksal's actions – as the jury apparently believed – at worst he was guilty of violating Merrill Lynch's policies of confidentiality and he deserved whatever punishment his employer would mete upon him.

Furthermore, according to the record, Stewart unsuccessfully tried to reach Waksal herself, another example of what the Times calls the "cozy world."  So, according to the Gray Lady's editorial board, if well-known corporate CEOs talk to one another (or at least have the phone numbers to the executive suites), that constitutes an "unfair advantage" that permits such people "to benefit from insider information," a state of affairs that meets with the Times' sternest disapproval.

However, let us put the shoe on a different foot.  One of us worked as a newspaper journalist and at times had direct contact with reporters from the New York Times.  Indeed, as those on the "outside" soon discovered, there was a "cozy relationship" between people in political power and journalists from the Times, Washington Post, and the national network news outlets like ABC and CBS.  Such relationships permitted reporters from those news organizations to gain access to people who would not give the time of day to the rest of us.

No doubt, such access to newsmakers gives journalists from the Times and other elite organizations a real advantage, not only in gaining prestige but also wealth.  In other words, according to the editors of the Times, there is nothing wrong with journalists from the Times having access to top people – often at the expense of the "little guys" slugging it out at smaller newspapers – but it is immoral for Martha Stewart to have access to the offices of a Sam Waksal.  To put it another way, it depends upon the "cozy world" of which one speaks.

According to our vaunted "Juror Number Eight," Stewart and her co-defendant were "arrogant."  He cited their not appearing on the witness stand somehow as proof of their arrogance – for which conviction apparently was a remedy.  His statements to the press express that sense of entitlement: "It bothered me that they only put one witness on the stand. It's like they were saying, 'I don't need to defend myself. I don't need to persuade the jury. We know we'll get off.'"

Moreover, Stewart's privileges as a CEO further stoked his fire.  Consider this exchange between Mr. Number Eight and Andrea Peyser of the New York Post, a reporter who wrote shrill anti-Stewart screeds, and whose editors obviously wanted Stewart "taken down a notch".  (The following comes from Elizabeth Koch's dispatch in Reason Magazine's website, March 5.)

(Hartridge)  It was kind of…"

"Arrogant?" Andrea Peyser asks hopefully.

(Hartridge)  "Yeah," he says. "Judging by some of the things they did, I'd say they thought they were special. I wasn't comfortable with the tone of [Peter Bacanovic's taped SEC testimony]. He sounded kind of…"

"Arrogant?" Andrea asks, nodding emphatically. "What about the fact that Martha charges her vacations to the company? Did that play into your decision?" What, Andrea, do you want him to admit the conviction was motivated less by evidence than character assassination and vengeance?  (Koch's comments)

"Yeah. She takes vacations and doesn't pay for them—it's like she thinks she's better than everyone else. But, I mean...the vacations didn't factor into our decision."

         "What are you thinking of in terms of insider trading?" someone asks.

"Well, as I understood it we weren't supposed to consider insider trading. But as far as not talking to the authorities and not cooperating, yes, she sounded like she thought she was better than everyone else."

These words speak to the duplicity of the government's case against Stewart – and the dishonesty of the jurors, judge, and prosecutors alike.  Keep in mind that Martha Stewart now faces a lengthy stay in prison because jurors decided that the original activity – the alleged "insider trading" that never occurred – was a "bad act" that triggered their viewpoints about everything else that happened afterward.  Moreover, the jurors apparently remained convinced that Stewart had engaged in the "crime" of "insider trading," or at least something similar, since they believed she was trying to cover up something illegal.  They could not have reached their decision otherwise, as it would have been a logical absurdity.

To make matters worse, even before Stewart was able to unload her ImClone stock, numerous other nameless investors – many who most likely fell into the "little guy" category – already had sold their ImClone shares.  Stewart's actions impoverished no one, nor did she gain an "illegal" or even "unfair" advantage.  By the time she acted, the market already had spoken.

In one of its news dispatches following the trial, CNN declared that the Stewart case was part of the government's "crackdown on corporate corruption."  This is ridiculous.  Stewart was not a "corrupt" executive, nor did she break the law when she sold her shares of the temporarily doomed ImClone stock.

No, Stewart apparently committed the "crime" of being wealthy and well-connected.  Furthermore, she sometimes was short and impatient with people, which is a trait that one of us in his brief career as a news reporter found to be endemic in people who were associated with the New York Times and other "elite" news outlets. 

Had she instead been a journalist or a politician, she would have had a chorus of supporters among the political classes.  Instead, she made the mistake of being a self-made billionaire, and now the journalists and the political classes are making sure that she is railroaded into a prison cell.

[Hank Kerchief]

She lied ...

What lie?

When was she under oath?

Since there was no insider trading, what did she lie about?

Why do people hate success, especially when it doesn't grovel to every parasitic slime that crawls out from under the rocks to criticize when they think it's safe?

Hank

[decimon]

She laid the tracks to the prison cell with her lies.

From what I've read, she never lied under oath. LEOs can lie to us in the course of an investigation but we can be jailed for lying to them. Don't think I like that.

[UCANSEE2]

Not innocent, true.

Prosecutable yes.


Why her, though? Why not the others who routinely use insider trading to make much much more on their investments than YOU?

Well, now, we don't want the public knowing that the insiders use their knowledge to profit, which means they are STEALING FROM YOU, if you don't have the same insider info.

Must keep the game protected. Must keep the investing public happy so they invest their dollars, so we can make millions of dollars.

[an amused spectator]

Many people don't understand that almost anyone can be "gotten" by the "authorities" if it's deemed necessary.

A person with Stewart's means could hire enough "eyes" to put more than half the jury, or members of their families, in jail for felonies within five years. It would be inevitable, with the legal code becoming almost as complex as the tax code.

[Truth29]

If she did anything else, she certainly wasn't tried for it. Like juror number 8, you sound like you are convicting her of alleged crimes not before the court.

[Redleg Duke]

Looks like Martha Stewart has unleashed a troll onto Free Republic. "g_f_axelsen...member since March 9th, 2004".

[edsheppa]

I really, really detest intellectual dishonesty.

[Helms]

This was a case where Rush's 1.5% chance of being wrong kicks in. But also it is this as well:

Tragic flaw From Wikipedia, the free encyclopedia.

A tragic flaw, in literature is the one problem an otherwise perfect protagonist (often called the tragic hero) has, that eventually brings him down in the end.

The concept was created in ancient Greek tragedy. More often than not, the tragic flaw is hubris, such as in the works Antigone and Oedipus Rex.

[UCANSEE2]

She made the mistake of lying, repeatedly, about a federal crime.

She did not tell investigators the truth. If the police arrest you in the street, you also do not have to tell them anything or tell them the truth. It is your right. They must provide the proof, YOU DO NOT HAVE TO INCRIMINATE YOURSELF.

She also, based on her position as a broker and as a board member, knew better. She knew the rules, and didn't follow them.

And she KNEW everyone else in positions like hers was getting away with it. This does not justify the crime, but sure would make one believe that they could get away with it, and not consider they would be prosecuted to the full extent of the law.

She was given ample chance to ammend her statements, and then she was given several chances to plead out.

So, now you are saying she should have 'changed her story', and instead of taking the blows for the crime, plead out, and avoid responsibility for her actions? You can't seem to make up your mind.

This is no ones fault but Martha's. Sometimes people have to stand up and accept accountability for their actions.

You started off stating that she did and has taken responsibility, faced a trial, been convicted, going to jail. What'd you want her to do, PLEAD OUT?

[Cboldt]

http://www.sec.gov/litigation/litreleases/lr18169.htm

A still-pending case that is very relevant to the discussion, but is seldom mentioned.

[Hank Kerchief]

She made the mistake of lying, repeatedly, about a federal crime.

What federal crime?

Hank

[CharacterCounts]

Non violent short term (less than 2 years) federal prisoners are sent to a facities that have no bars at all. The are more like a college campus than a prison. She will be permitted to check herself out about twicw a week to go shopping at the nearest town. She may even have some menial job for her in the local town which she can report to daily. Her living quarters will be similar to a dorm room with no locks. She will be required to perform duties at the facility or risk losing her priviliges. There are no guards per se, however she will be required to answer a check in two to three times daily.

It will not be the most pleasant of circumstances, but will be far better than a prison. If, however, she refuses to follow the rules, she will be shipped to a medium security prison with real fences, guards and bars.

I can tell you this because I have represented these types of individuals in the past. Additionaly, the government will take extraordinary measure to insure that no harm befalls Ms. Stewart. They simply do not want the bad press that would result.

My prediction is that Ms. Stewart will be a model prisoner for her short stay (she may be arrogant, but she's not stupid) and make a significant recovery in financial terms once she is released.

[xusafflyer]

Spoken like her defense attorney :)

I'm just following human nature. Something like this just doesn't happen spur of the moment and only once.

[rdb3]

Why her, though? Why not the others who routinely use insider trading to make much much more on their investments than YOU?

She was the one charged and tried. Let the others be charged and tried. They have not so far. She has. And has been convicted.

Well, now, we don't want the public knowing that the insiders use their knowledge to profit, which means they are STEALING FROM YOU, if you don't have the same insider info.

We're talking about two different things. I'm talking about Martha Stewart specifically. In this case, she was all that mattered or should have mattered.

Must keep the game protected. Must keep the investing public happy so they invest their dollars, so we can make millions of dollars.

You are most welcome to your opinions. However, this is outside the purview of this case.

Show 'em my motto!

[BlueNgold]

Your right to avoid self-incrimination does not extend to allow you the right to lie about details or make knowingly false statements to protect yourself and others. Your right to avoid self-incrimination gives you the right not to answer - period.

I'm saying that she was given the opportunity to correct her known misiniformative statements, call it changing her story if you wish, but she lied ... she was given the chance to come clean long before this ever went to a grand jury. Had she done so she likely would have been compelled as a witness in the related cases, but not charged.

Once again .. why do people feel the need to defend their fave celebrities? She lied. She got caught. She went down. All this griping about fixing the corruption of corp America, just as long as it's not Martha ... what a load of hooey.

[rdb3]

LEOs can lie to us in the course of an investigation but we can be jailed for lying to them. Don't think I like that.

Whas has that to do with this case?

Show 'em my motto!

[biblewonk]

She sold the equivalent of ten dollars worth of stock on the advice of her broker, or was it a friend of hers? Whoopteedoo, where's the crime?

[BlueNgold]

Federal Crime of insider trading (not her, Waxel(sp)). Her buddy from ImClone was under investigation, which is how they came to even look at Martha in the first place. It was a legitimate investigation, and he went down hard. In the course of their investigation they came upon evidence leading them to Martha. When they interviewed her, she lied. That is what she was covincted of - giving knowingly false statements to investigators.

The feds didn't just pull her name out of thin air, people. The $$ trail and communications records trail led them to her. She could have avoided all of this, but she chose not to. Her bad decision cost her millions, and maybe her freedom.