Asymmetrical Information

One of the themes today at AI seems to be the stupid things otherwise intelligent people do or say. Along those lines, somebody riddle me this; why do people, even people who are evidently extremely accomplished at strategizing and possessed of fine analytical minds, decide, when Federal Agents show up outside their office asking questions, decide to say anything other than, "Any question you have will be answered by my legal counsel."? It boggles the mind.

Her real crime is being a bad investor.

Her real crime is being a bad investor.

whats with the double, triple, xnumber of posts?

jane/mindles/whomever, is this your spam blocking software?

id much rather see ads for porn than 15 versions of the same post!!!

Her crime is being famous. Does anyone seriously believe that Jane Doe would have had to do anything but pay back her profits plus a fine (usually equal to the profits in these cases, I think).

This case is bogus.

Her crime is bad taste.

Her crime is being famous.

Well, first, to get a slap on the wrist she would have had to have pled guilty, which has consquences for her ability to lead a major corporation. She needs to be exonerated.

Secondly, there are a large number of offences that for which the poor serve years in prison, that the wealthy generally get a near pass (think anything drug related).

However, the law does tend to come down hard on people in positions of responsibility that are involved in financial crimes.

Surely its not too terrible to have the wealthy face *some* consequences for their actions?

Tom West,

It's my understanding that insider trading, especially a one-time relatively small-scale offense, is usually handled as a civil matter, so no guilty pleas are involved. And it's sufficiently unclear that Stewart was guilty of insider trading that the govt chose not to charge her with it.

Instead they came up with the notion that proclaiming one's innocence is a crime. That strikes me as a very strange charge.

I agree with you, by the way, that the wealthy often get a pass on things that poor people spend a lot of time in jail for, and that drugs are a good example. A similar issue is the gutting of IRS enforcement.

There is no doubt that insider trading laws are poorly enforced. I would very much like to see more vigorous effort in this area. But spending these sorts of resources on a marginal case because the alleged offender is famous, (and can be portrayed as an unsympathetic person in court) strikes me as neither fair nor wise.

I'm wondering just what Martha's guilty of.

According to the prosecution's star witness, when the head of ImClone and his family started dumping their stock, Martha's broker called her and told her as much. Martha then ordered all her stock sold, too.

Now, what would any reasonable person do if his broker called and said that the CEO and all his family are selling their stock in a company? Why, pretty much what Martha did.

If that's all correct, then I'm not sure what she did was insider trading. Clearly, her broker was in the wrong. But I don't think Martha was the more guilty party.

I seriously tell people these days who go on about the supposed abuses in the Patriot act that the violations of civil liberties that really worry me these days are going on in the Martha case. That federal prosecutors can bring you to trial, not for any specific crime, but for having the gall to proclaim your innocence, is straight out of "Darkness at Noon"...

Seriously, if Stewart had been possessed of the forsight to simply inform the Federal Agents that all communication would come from her legal counsel, there would be no case against her. There may have been some short-term whipsawing in her company's stock value, but it would have blown over soon. This illustrates the troublesome nature of federal law regarding citizens' communications with Federal Agents, but as I stated above, it always suprises me that very intelligent people don't understand, or aren't advised well ahead of time, as a manner of general policy, that one never, under any circumstances, should have a conversation with a Federal Agent who is pursuing official business. I've occasionally have come into contact with them, usually as a matter of gaining security clearances, and I simply will not engage in conversation with them, not out any sense of resentment or political belief, but simply because there is too much potential for grief.

Re-reading that post, and to clarify, other people obtaining security clearances has caused to come into contact with Federal Agents. I've never had one, or sought one.

Bernard:

Approximately $240,000 isn't relatively small-scale for my brokerage account. This is a criminal case for obstruction of justice as Martha (allegedly) lied when she issued her statement saying she had a limit order in to sell the stock when there is no record of such an order. AFAIK, the insider trading aspect was done by her broker and

Secondly, and more seriously is Martha's status at her own company. Officers of companies are held to a much higher standard by the SEC as well they should be. Since hers is a company of personality, by lying about her (alleged) insider trading she is artificially floating the stock price of her own company.

Lastly, this kind of white collar crime needs to be addressed this strictly. It's the same kind of logic of a $5,000 fine for littering on a highway...since people are so infrequently caught, they must be made to pay heavily when they are caught. Fame should be a double edged sword in this instance, I think it's ludicrous that the famous should enjoy all the benefits of notoriety yet expect to be treated as an ordinary citizen when it's convenient for them.

Hey... she'll have her day in court! What're y'all worried about?

Jayson,

Let's be careful. Her proceeds from the sale were roughly $240,000. Had she waited until the public announcement to sell she would have realized about $60,000 less. So we're talking about a $60,000 gain, not $240,000. That's still a non-trivial sum to me, and I suppose to you, but not to her.

Of course that doesn't mean she didn't trade insiderly (what is the right adverb here?). But the critical point, to me, is that the government chose to charge her with these other things, but NOT insider trading. That's like charging someone with using a firearm to commit a felony but not charging them with the felony. Bizarre.

"Her crime is being famous. Does anyone seriously believe that Jane Doe would have had to do anything but pay back her profits plus a fine (usually equal to the profits in these cases, I think).

This case is bogus."

Well, there's a first time for everything--I agree completely with Bernard Yomtov. Lame case--I'm hoping that Justice gets their fingers burned badly on it, to discourage future game playing in this area. They should have pled it down to a fine--this is as much of a waste of government time and resources as the Winona Ryder case, if not more so.

"Instead they came up with the notion that proclaiming one's innocence is a crime. That strikes me as a very strange charge."

I wouldn't deprive even a serial killer of the right to proclaim his innocence without being charged with a crime for it (unless he or she did it on the stand, under oath, and perjury was proven)--it seems a bit disproportionate to try to lock up Martha Stewart for it.

"Hey... she'll have her day in court! What're y'all worried about?"

She's paying millions of dollars in legal fees--and the government is blowing millions of taxpayer dollars--in a case involving sixty grand in questionable profits and where the government has been forced to come up with an asinine legal theory for charging her, since they don't have the cojones to try to get her for insider trading. Even the steroid prosecutions announced by Ashcroft yesterday are a way better use of resources than this.

She's paying millions of dollars in legal fees--and the government is blowing millions of taxpayer dollars--in a case involving sixty grand in questionable profits and where the government has been forced to come up with an asinine legal theory for charging her, since they don't have the cojones to try to get her for insider trading. Even the steroid prosecutions announced by Ashcroft yesterday are a way better use of resources than this.

Oh cry me a river... The NEA probably spent more money last year funding an exhibition of Piss Christ. As for asinine legal theories... she's just some K-Mart floozie with lawyer trouble. What do you care? You hot for her or something? She's married -- and you're probably not her type. So get over it. Admit you have an irrational Martha-fixation and move on with your life. I'm sure if she cared about your troubles she'd tell you the same thing.

I agree with Bernard. The case is bogus. To me, it looks like a clear case of prosecutorial abuse. "If we can't get her for insider trading, we'll get her for something else..." Obstruction of Justice covers a lot of ground.

Keep in mind that the career advancement of a prosecutor is not based on "found truth", it's based on the number of convictions.

In a high profile case such as this, a conviction - any conviction - is a definate career enhancer for the states attorney. An acquital, on the other hand, is a big negative. They have too much money - and ego - invested to just let it go.

Roy Greenwell

OK - here's the reason for the double and triple posts.

When I finished composing my previous comment, I naturally then clicked the "post" button. Unfortunately, nothing happened immediately. Indeed, it took a full 6 minutes before my comment was actually - "posted". I have no idea what causes this. It doesn't seem to be a factor of which software product the blogger uses because I've seen it happen on nearly every blog I comment on. I guess it's just one of those "internet things" - routers, backbones, DSL/Cable nodes etc.

If you don't have the patience to wait it out, the natural inclination is to click the post button a second or third time. Therefore, two or three posts in a row.

Roy

I agree with the point that the prosecutor has something to gain here, but Martha brought much of this on herself by *lying* about her previous stock order. If she weren't doing something she thought wrong she could have simply said that her broker called her and recommended that she sell her stock and gone on to chide her *new* stockbroker about why she didn't buy more ImClone. Instead, she specifically chose to make up a story about how she had a limit order in to sell the stock for months, which was quickly proven false.

Don't think of this as a prosecution as a normal person, she was an officer of a publicly traded company. She's signed numerous documents for many years all telling her that her actions have much worse consequences and that *all* stock trades are monitored. She was a broker for years herself on Wall street and therefore clearly understood that she was doing something wrong.

Maybe they are attacking her for her fame, maybe the prosecutor has personal motivations, but she chose to do something stupid in a maelstrom of an SEC crackdown on corporate officers.

Couldn't it be said that press releases from the FDA regarding the status of Erbitux during the approval process affected stock prices and that the government had a hand in determining the value of the stock?
If Martha's broker hadn't freaked out she wouldn't be in this spot. Or would she? What if he said to hold and the stock went up on the good news and then she sold, would that be insider trading? When could she sell and not be accused of insider trading?

Maybe they are attacking her for her fame, maybe the prosecutor has personal motivations, but she chose to do something stupid in a maelstrom of an SEC crackdown on corporate officers.

All I know is that if the feds are sniffing around anywhere near you, DON'T DO ANYTHING STUPID. Why anyone would try to cover something up in this atmosphere, especially someone as knowledgeable as Stewart, is totally beyond me.

"...she was an officer of a publicly traded company. She's signed numerous documents for many years all telling her that her actions have much worse consequences..."

I think those rules apply to false statements about your own company. Here the statement is about her personal business outside MSO.

Look. What's the worst thing that might have happened? Waksal got the FDA news and basically panicked and did something stupid. Stewart found out that Waksal was selling and sold also. This was a hurried and very far from clearly illegal decision. Then, unsure of her position, she lied to the investigators. (I'm not saying Stewart lied; I'm saying that's the worst case.)

So Waksal is in jail for seven-plus years and the prosecutors, planning to dine out on this case for a long time, not to mention improving their career prospects dramatically, now go after Stewart, who has already spent orders of magnitude more than $60,000 on this.

By all means, let's enforce the insider trading laws, but let's be sensible. People commit murder and don't spend seven years in jail. Nothing violent happened here, and the alleged crimes of Waksal and Stewart were one-time affairs. This was not a Boesky-esque ring of thieves.

" she specifically chose to make up a story about how she had a limit order in to sell the stock for months, which was quickly proven false."

Not so, that's still her and her stockbroker's defense. The charges against her depend on recollections by federal investigators about which pronouns she used in interviews. The defense lawyers this week proved that the government couldn't even produce an accurate transcript from tape recorded interviews, so what are the chances two year old memories are correct?

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