Martha Stewart

Topics: Accounting scandals, Grand jury, Business ethics Pages: 3 (671 words) Published: June 1, 2011
Case 5-Martha Stewart: A Brand in Crisis

1. Stewart repeatedly denied any wrongdoing, despite the conviction and failed appeal, yet she still says she did nothing wrong. Is this the right strategy?

Yes, admit your mistakes, learn from them and move on but don’t continue to make them over and over again. Stewart demoed that she engaged in any improper trading when she sold her shares of ImClone stock (Ferrell, Fraedrich, & Ferrell, 2007, page 345).Stewart claimed she had previously issued a “stop-loss” order to sell her 3928 shares; she also called her friend Sam Waksal, but could not reach him. However, Stewart’s explanation that she unloaded her stock because of a pre-arranged sell order collapsed when Douglas Faneuil, the broker’s assistant who handled the sale of the ImClone stock for Stewart, told Merrill Lynch lawyers that his boss, Peter Bacanovic, had pressured him to lie about a stop-loss order.

2. Did Stewart’s actions justify the subsequent sentence to her and those around her?

Despite her reputation and business successes, Stewart was indicted in 2003 on criminal charges and faced several civil lawsuits to her sale of the ImClone stock (Ferrell, Fraedrich, & Ferrell, 2007, page 344). Stewart sold the stock on December 27, 2001, one day before the Food and Drug Administration (FDA) refused to review ImClone System’s cancer drug Erbitux; the company’s stock tumbled following the FDA’s announcement. On June 4, 2003, a federal grand jury indicted Stewart on charges of securities fraud, conspiracy (together with Bacanovic), making false statements, and obstruction of justice (Ferrell, Fraedrich, & Ferrell, 2007, page 346). At her trial, the indictments for securities fraud were dropped, but the other indictments were prosecuted (Ferrell, Fraedrich, & Ferrell, 2007, page 347). Stewart faced humiliation and some prison time but examples have to be set when running a company. You just can’t do what you please because you...
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