Martha Stewart Legal Case and Punishment - Assignment Example

Martha Stewart Legal Case and Punishment 1) Martha Stewart did indeed commit the crime of insider trading when she sold her ImClone shares on December 27, 2001. She was tipped off by Peter Bacanovic who previously worked at ImClone and was a broker employed by Martha Stewart. One of his contacts in the company advised him that the Wasklas, the owners of ImClone are about to sell all their shares of the company because a drug they'd been hoping would be approved did not get the FDA approval. That meant that their shares were about to plummet, so they wanted to get out before losing much money. Bacanovic, wanting to help Martha avoid the same fate, tipped her off of what was going to happen, even though it was illegal and immoral to do so, since the issue of the FDA denial to approve that drug was still prohibited from being told to the public and was kept under wraps. No one was supposed to know about this until the company would launch a formal statement to the press, and then and only then were people allowed to trade their stocks of the company. Since Bacanovic tipped off Martha before that point in time, both he and her were guilty of insider trading. He had disclosed information that was unknown to the public to her, and she received the insider trading tip and followed up on it by selling her shares of the company and making a profit from it even though it was clearly forbidden. Her actions after that happened clearly show her fuilt. Bacanovic and her phoned each other several times and even had lunch together, possibly discussing what they had done. Stewart also tried to change her phone log by altering a message she had once sent that reveals her knowledge of the insider trading before the time the company's status was made public. Bacanovic's assistant was even given perks in order to keep quiet about the case. There is no question that Martha Stewart is a wise and competent woman. She had to have known that the tip she had received was forbidden and out of the public's knowledge. She knew it was wrong to sell her shares before the announcement of ImClone was made to the public, but did it anyway. She even hired a criminal lawyer before any charges were made, and in the end of the trial asked her judge for leniency, stating that she knows that she had done something wrong. So clearly, Martha Stewart did commit insider trading. 2) US attorneys and the Securities and Exchange Commission (SEC) wanted to indict Martha Stewart of more harsh crimes, including conspiracy, obstruction of justice, making false statements. Stewart and Bacanovic were charged with trying to conceal evidence about the fact that he had provided her with nonpublic information about ImClone Company. They were also accused of lying to the government attorneys who questioned them and trying to hamper the investigation about the case. But Stewart was also charge with securities fraud, which is a far more serious crime. They claimed that she'd made a series of false statements about her innocence that misled investigators and as a result her company's net worth held up instead of declining as it should have. While it is definitely true that Stewart did commit insider trading, lied to her investigators and tried to conceal evidence about the case, the last charge made by the US attorneys and the SEC was very flawed. Whether conscious or unconscious motives of some kind motivated them to file for that felony and charge her with it, it was very misguided to do so. She did in fact did all the previously stated crimes, but as far as pleading her innocence to maintain her company's worth- that is just overreaching and exaggerated. After all, she had to state her innocent to try and defend herself in the face of the court trial. Her motivation and reason for doing that was simply to try and protect herself and plead her innocence. It is unreasonable to think that when she was faced with possible imprisonment and heavy fines, what she was thinking of was keeping her company afloat, much less seeing as how this would be another felony which would make her even guiltier and put her future in greater risk. This was also established during the trial and a statement was made that said that she couldn't defend herself without pleading her innocence, and that her motive was simply to do so. She did not think about anything other than that. 3) I agree with the jury that Stewart was guilty beyond a reasonable doubt of conspiracy and obstruction of justice. Martha was tipped off by her broker as to what was going to happen to the ImClone shares and acted upon learning this in order to sell her stocks to prevent herself from losing money for the shares that were about to plummet. After doing this, she tried to conceal her guilt in several ways, including the time she went to her assistant and wanted to change the phone log so that a phone message she had sent to Bacanovic would not show her guilt but appear innocent instead. She also lied to her investigators about the facts of the case and by doing so, she obstructed justice. She has been interviewed twice by federal investigators and SEC investigators and tried to lie about the facts of the case, claiming that she had planned to sell the ImClone shares if they were traded in a certain value or a lower one than that. However, investigators found discrepancies in her testimony and in Bacanovic, and it is very clear that she was guilty beyond a reasonable doubt. Being the clever woman that she was, she had to have known that what she was doing was wrong and criminal, but chose to do it anyway and afterwards try to conceal any evidence of it occurring. 4) Martha Stewart was sentenced to five months in jail followed by five months of home imprisonment and a fine of 30.000$ by the criminal court judge. This was a vey lenient sentence, as she could have gotten a much longer time in prison and could have had her home confinement replaced by more time in prison. The judge chose to be lenient on her, partly because she made a plea to her, saying that she deeply regrets what she's done, acknowledges that it was wrong and is deeply sorry for her misdeeds. The judge believed that she was sincere and was suffering emotionally for what she's done and would continue to suffer for it. That is why the sentence was light. The judge knew that Stewart would never do such a thing again, and this was probably also a factor in her giving the light sentence. In the SEC civil case, Stewart agreed to a five-year ban on serving as an officer or director in her company and to a fine of about 200,000$. This may be considered a harsh punishment, but it is definitely preferable to a longer period of jail time, so all in all- I believe the punishment she was given was a fair one. Bacanovic agreed to a fine of about 75,000$ from the civil case as well as his criminal case punishment which included a 5 month jail sentence followed by a 5 month home confinement (like Stewart) and a 4,000$ fine. His punishment is fair in my view because he was a broker working in that line of business and used his connections to tip the information to his client. By doing so, he led to the entire chain of events. He could've gotten a much worse punishment. As for Faneuil, he got a 2,000$ fine due to the fact that he originally concealed some of the facts and was given perks to stay quite when he realized what had happened. It is because his cooperation with investigators in the later stages of the investigation that he received such a light punishment. All punishments were therefore appropriate. Read More