Martha Stewart Case

Martha Stewart Case

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Institution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Martha Stewart Case

Summary

Martha Stewart case bounded her sale of 3928 shares in ImClone Systems Inc., where she was alleged to have lied to both investigators and her own investors (Jennings, 2003). Martha had decided to start a media empire, Martha Stewart Living Omnimedia in 1997 after she was divorced from her husband. On December 2001, she cashed out her ImClone bet at $58.43 per share thus gaining profits of approximately $229,500. However, the Food and Drug Administration announced that ImClone’s products were not fit to treat cancer related diseases. Therefore, the cost per share reduced considerably and by mid 2002, they had reduced to less than $10 per share.

Stewart, together with her former broker Bacanovic lied before court that they had agreed to sell the ImClone stock when it fell below $60. This was not the case because investigators stated that Steward had only agreed to sell her shares after getting a tip from Douglas Faneuil, Bacanovic’s assistant that the founders of ImClone were dumping their shares. As a result, Stewart was apprehended and taken to court under three charges. Her actions were against business ethics. She had lied before the prosecutors and the media that she had agreed with Bacanovic to sell the stock when they hit below $60 and that she had no knowledge that Sam Waskal, founder of ImClone wanted to sell his shares. She was also charged with conspiracy and obstruction of justice. On July 16, 2004, she was found guilty on those three charges and sentenced to five months in jail, the other five-house arrest and two years under probation supervision.

 

 

Answers

1. $45,673 ruined her image because she lost the confidence she had gained from her fellow brokers, which resulted to huge loses in her media company.
2. Five months jail term is not long enough to serve for breaching of an oath before the law. The consequences to deliberately giving false and deceptive information are great and anyone found guilty of perjury should be sentenced for a longer jail term.
3. Approximately 51 cases of insider trading occur yearly (Spotlight on Insider Trading, 2012).

 

References

Jennings, M. (2003). Business ethics: Case studies and selected readings. Mason, Ohio: Thomson/South-Western.

Spotlight on Insider Trading. (2012). U.S. Securities and Exchange Commission. Retrieved from http://www.sec.gov/spotlight/insidertrading.shtml