Martha Stewart Case

Martha Stewart Case

As the whole world knows by now, Martha Stewart was found guilty of conspiracy, obstruction of justice, and making false statements to the government in connection with the sale of her ImClone Systems stock. She says she sold the stock because the price went below $60, as previously arranged with her then-Merrill Lynch stockbroker and co-defendant Peter Bacanovic. The government says she sold it because she was illegitimately tipped off that ImClone CEO and friend Samuel Waksal was unloading his stock. He was selling because he had learned before the public did that the Food and Drug Administration would reject his application for the cancer drug Erbitux. The government never alleged that Stewart knew about the FDA decision. Most ironically, the FDA has now approved Erbitux.

Insider trading is the trading of a corporation’s stock or other securities   by individuals with potential access to non-public information about the company. In most countries, trading by corporate insiders such as officers, key employees, directors, and large shareholders may be legal, if this trading is done in a way that does not take advantage of non-public information. However, the term is frequently used to refer to a practice in which an insider or a related party trades based on material non-public information obtained during the performance of the insider's duties at the corporation, or otherwise in breach of a fiduciary duty or other relationship of trust and confidence or where the non-public information was misappropriated from the company. Rules against insider trading on material non-public information exist in most jurisdictions around the world, though the details and the efforts to enforce them vary considerably. The United States is generally viewed as having the strictest laws against illegal insider trading, and makes the most serious efforts to enforce them.

Corporate insiders are defined as a company's officers, directors and any beneficial... [continues]

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