Exchange Commission accused Martha Stewart
America’s best loved homemaker, Martha Stewart, is known for her recipes and her practical home applications that have saved time and money for millions of housewives all over the world. Yet, behind that facade, there is another side of Martha Stewart that is not seen by many and has recently been brought to light following her indictment in the ImClone stock scandal of 2001. The United States Securities and Exchange Commission accused Martha Stewart of insider trading by acting on an insider tip that allowed her to avoid a loss of a paltry US$ 45, 673.
This was the proverbial straw that broke the camel’s back as the authorities had already begun scrutinizing the moves of Martha Stewart even prior to such sale. As such, this eventually led to her conviction and her jail sentence. The beginnings of this controversy were first unveiled when it was discovered that Martha Stewart made a large sale of stocks a day before the price of the stock plunged. When the drug of ImClone, Erbitux, was not able to secure the approval of the Food and Drug Administration (FDA), the stock prices dropped.
It was noticed, however, that even prior to the final decision of rejection several of the high ranking executives of the company had begun unloading their stocks. This began the series of investigations that led to the arrest and conviction of several of the founders, executives and stockholders of ImClone. In the Congressional hearing that ensued, it was shown that the corporation had a culture of corruption even way back in 1986.
This extended way into the present when ImClone was found to engage in forgery and media manipulation to control its stock price. When the CEO was suspected of informing friends and relatives of the failure of the new drug to secure approval and the imminent collapse of the company, Martha Stewart also took part in the sale of her stocks. The securities fraud that she committed was compounded with charges of obstruction of justice for her refusal to aid the authorities in getting to the bottom of the problem.
It was shown during the trial that Bacanovic had ordered his assistant to inform Martha Stewart that then CEO Sam Waksal of ImClone had begun selling off his shares in anticipation of an adverse FDA ruling. Since there was so much money invested in the drug and as a result of which it became hyped up, it was expected that the shares of the company would plummet.
In anticipation of this, Sam Waksal had begun selling off the shares of his family including the shares of his daughter Aliza who had over US$ 2.5 million in shares. Jack Waksal, the father of Sam, also sold off US$ 8. 1 million of his share over the same time period as Martha Stewart. It did not take long before the other executives leapt on the bandwagon and started to unload their shares. John Landes and Ronald Martell, among others, also sold off their shares prior to the FDA decision. These massive sell-offs that occurred a day or two before the decision of the FDA alerted the authorities of the insider trading and Securities violations that had been committed.
The role of Martha Stewart was never clearly established in this case since it was not proven that she had masterminded the operation. It was clear, however, that she used insider information to sell her stocks prior to the adverse decision. Her refusal to provide information and the false information that she had given authorities also led to her conviction for obstruction of justice.
As a result of these acts, she was sentenced to five months imprisonment and five months house probation with a ban on holding executive or CEO positions in any company in the United States and abroad. The ImClone scandal was huge for the reason that it involved a famous celebrity such as Martha Stewart who people had held in high regard. It must be pointed out, however, that despite this mishap, Martha Stewart has managed to recreate herself and spin a new image of herself. Crime does not pay but then again she is Martha Stewart.
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