Martha Stewart case

Topics: Stock market, Stock, Insider trading Pages: 5 (1056 words) Published: October 9, 2014
Insider trading is an illegal activity that is believed to raise the cost of capital for securities issuers, therefore decreasing economic growth. It’s an illegal action that can be used by greedy individuals in order to avoid potential losses, or to make substantial gains without the information first being released to the public. Martha Stewart, who is a representative of successful woman, has a strong business in the United States. However, after her scandal blown out, her image was totally destroyed. Some people scold her to wear the mask, and some people scold her was a big swindler. Basically, the scandal of Martha Stewart was caused by a phone call from her old friend and also her stock account manager, Peter Bacanovic. On December 27, 2001, since Bacanovic got some information about ImClone System which is a biopharmaceutical company, he gave a call to Martha Stewart. Stewart was told to sell all her shares in ImClone because ImClone was going to start trading downward. With this insider stock information, Stewart sold all her shares in ImClone at a profitable price. Without doubt, Stewart was guilty of insider trading because her behavior could influence other investors in the stock market. Not every investor is rich; the severity of her action on insider trading could cause other investors losing their money, even cause bankruptcy. That’s why the insider trading is not allowed in the stock market. Besides the insider trading, Stewart did some illegal and unethical actions in order to conceal her guilty behavior. To cover up the insider trading on stock market, Stewart conspired with Bacanovic that they had an agreement on a $60 sell order of ImClone Company. In addition, she changed Bacanovic’s December 27 phone message from “Peter Bacanovic thinks ImClone is going to downward” to “Peter Bacanovic re ImClone” even though she told her assistant to restore the original wording at the end. Those actions are unethical for her to conceal the fact that she had insider trading on her stock. U.S. Attorneys and the SEC did not do really good judgment in indicting Stewart. At the beginning they found two important witnesses to prove that Stewart was conspiracy and obstruction of justice charges. They accused Stewart that when she learned the insider information from Bacanovic about the dropping of ImClone share price, she sold out all her shares at once. However they had not enough evidence to prove that there was a $60 sell agreement between Stewart and Bacanovic. In addition they lost another important witness who had been traveling with Martha Stewart on December 27. Pasternak vacillated about the clarity of her recall about a Stewart remarked that “Isn’t it nice to have brokers who tell you those things?” the remark was instructed to disregard by the judge. Therefore Stewart was not charged by this count. Nevertheless I don’t think that prosecutors consciously or unconsciously had additional motives for pursuing the case. There was no any prove to show that Stewart and Bacanovic fabricated the $60 sale agreement. U.S. Attorneys and the SEC did not do really good judgment in indicting Stewart. At the beginning they found two important witnesses to prove that Stewart was conspiracy and obstruction of justice charges. They accused Stewart that when she learned the insider information from Bacanovic about the dropping of ImClone share price, she sold out all her shares at once. However they had not enough evidence to prove that there was a $60 sell agreement between Stewart and Bacanovic. In addition they lost another important witness who had been traveling with Martha Stewart on December 27. Pasternak vacillated about the clarity of her recall about a Stewart remarked that “Isn’t it nice to have brokers who tell you those things?” the remark was instructed to disregard by the judge. Therefore Stewart was not charged by this count. Nevertheless I don’t think that prosecutors consciously or unconsciously had additional...
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