Respond to each classmate 100 words a piece
The question they had to answer. (After researching and reading about the Martha Stewart ImClone case, please write a brief summary of what happened, the evidence used in the conviction, and identify the business crime(s) alleged and committed.)
Martha Stewart and her broker, Peter Bacanovic, were indicted on several charges of obstruction of justice, securities fraud, conspiracy and making false statements (Hall, 2021). The charges were brought after Martha Stewart was detected selling her shares of ImClone’s stock. Selling stock is not a crime in itself but it was the action behind the selling in Martha’s case. Stewart was alerted by Bacanovic that ImClone’s stock would plummet due to the FDA’s hand in denying reviewal of a cancer drug. ImClone was a biopharmaceutical company that specialized in the area of oncology. The U.S Securities and Exchange Commission relinquished the duties of paying what they would have loss upon Stewart and Bacanovic (Carlin, 2003). The amount that Stewart would have lost was estimated to be $45,673 due to the stock dropping from $60 to $48 (Hall, 2021).
Furthermore, it was requested that she step down as an officer of any public company (Carlin, 2003). Stewart and Bacanovic were not the only ones who committed crimes as such. The CEO of ImClone was the ring leader of this operation as he was forbidden from selling his shares but exclusively told those who were in his close circle. Stewart’s claim was that she had a stop-loss arrangement with Bacanovic. Despite that, Bacanovic’s assistant gave in to the pressure and even testified against Stewart and Bacanovic (Hall, 2021). Although Stewart was convicted and served her time, it is questioned if Stewart’s celebrity status was not a factor would she even be a factor. Stewart has managed to renew her stardom and pick up where she left off. This can be attributed to her loyal fanbase.
In the Martha Stewart ImClone case of 2003, Martha Stewart was “convicted of making false statements and conspiracy” and was sentenced to “serve five months in prison, five months of home confinement, and two years on probation.” (Jennings, M., 2017, p. 254) Prior to this conviction, Stewart owned the Martha Stewart Living Onminmedia which consisted of multiple television shows, publishing and media corporations. These companies combined were seen and known of around the nation for being some of the best homemaker companies to date. However, in the initial 2000’s Martha Stewart was alleged of making tractions that were considered insider trading when she would fraudulently tell stockholders false reports of income and stock records, while selling her own stocks to ensure that her accounts did not fall. In this case, Stewart knew that the FDA refused to acknowledge per new product Erbitux as an acceptable form of treatment for cancer patients, which made the drug useless. Even though millions of dollars from multiple stockholders had put money into the stock for the drug to be completed. Stewart assured them that the drug was safe and would be approved, while giving herself time to sell off her own stock and shares of the Erbitux drug and ImClone accounts. So, when the ImClone stock market fell, twenty-four hours later, each of the stockholders lost all their money in the company’s account, while Martha Stewart was able to keep all her assets.
During the trial, the court was able to indicate phone records that showed Stewart’s company called multiple stockholder’s the same day as well as Sam Waksal’s daughter who conveniently sold her Erbitux shares the same day that Stewart did. The courts were also able to subpoena Stewarts and Waksal’s bank records which showed security fraud. The crimes that Martha Stewart committed are considered white collar crimes because it consisted of “corporate fraud and public corruption.” (Jennings, M., 2017, p. 250) Which is exactly what Stewart did by lying about the FDA denial of the drugs, lying to the stockholders, and allowing herself and her friend the time to sell their stocks before the company went under. These actions broached both “crossed ethical and legal lines” according to company regulations. (Jennings, M., 2017, p. 251) The actions of Stewart were also included marketing missteps because she did not receive a permit or approval from the FDA before gaining stocks from stockholders. She also committed friendly fire, because she informed her friend and coworkers daughter of the situation, allowing them both to retain their money from the stock while allowing everyone else’s money to be taken. While I believe that Stewart could have been charged for multiple fraudulent activities the courts decided to only charge her with making false declarations and scheming, which allowed her to have a lighter sentence than if charged with company conspiracy and fraud.