It’s not hard to view the federal prosecution of Martha Stewart, the multimillionaire home-decorating diva, as a witch hunt. The charges are devoid of the main crime she is supposed to have committed: insider trading.
Surely, the 41-page indictment would have included such charges had there been anything to prosecute. Instead, the Securities and Exchange Commission will file civil charges against Stewart to recoup the $45,000 or so of gains that supposedly are ill-gotten.
It’s a case in point of how much power the government has to destroy people even if they did nothing or little wrong. Stewart is a high-profile celebrity who made errors in judgment about the same time that Enron and other true corporate scandals were capturing the public imagination.
What better way to show the public that the government is serious about white-collar crime than to crack down on the dealings of an entrepreneur whose name is so well known that it even graces the labels of bed sheets at Kmart?
Stewart sold nearly 4,000 shares of stock in ImClone, a pharmaceutical company founded and then headed by Samuel Waksal, a personal friend. She sold it one day before the company was to get bad news from the Food and Drug Administration regarding a cancer drug the company was developing.
According to published reports, Stewart appears to have relied on the advice of her former stockbroker who improperly told her that Waksal family members were dumping their stock. The broker also is being charged by the government, and Waksal will soon be sentenced for insider trading.
What about Martha Stewart? “This criminal case is about lying — lying to the FBI, lying to the SEC, lying to investigators,” said U.S. Attorney James Comey. “Martha Stewart is being prosecuted not for who she is, but because of what she did.”
So, she might not have done anything criminal with regard to the stock sale, but she might have concocted stories about why she sold the stocks to keep the feds at bay. Not a smart move, especially from someone as savvy as Stewart. But she was allegedly covering up a noncrime.
It’s not that hard to understand why one might try a cover-up. Laws regarding insider trading are not completely clear. And it’s easy to fear what a federal investigation might mean.
Stewart’s company has taken a hit in stock price and reputation. She resigned last week as chairwoman and CEO of her company, although she will remain as chief creative officer. As she explained in a statement, this will be a long trial. She will pay a high price, win or lose.
Stewart’s many detractors decry her arrogance and ambition. But dislike of Stewart’s personality, envy of her success or the need to teach a lesson to corporate wrongdoers are not good reasons to pursue this case. We hope the feds fall on their face on this one.