Martha Stewart Insider Trading Scandal

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Martha Stewart Insider Trading Scandal

Answer 1

Martha Stewart's image has played an important role in the insider trading scandal. Some say that it was Martha Stewart's image and popularity that resulted in the exact scandal. They argue that it was the people who are envious of her position. Resultantly, they brought about wrongful legal cases of insider trading against her. The conduct of Martha Stewart was just that of a wary stock trader and owner. She was only interested in protecting her position in the stocks of ImClone. She was not at all interested in insider trading. It was her prerogative to prevent herself from any losses in her stock shares through giving stop-loss orders to her broker. Accordingly, she claims that she had issued the stop-loss orders to her broker, which allowed, and mandated the broker to sell the stocks if they fell below $60.

Then, the image of Martha Stewart was important in the insider trading scandal. It was clear that she was a very popular person and her company also included the brand name Martha Stewart. She was not very well separated from the company brand name, and the company brand name was intertwined with her popularity. This made bringing a case against her even more difficult. She was a public figure and accordingly it was expected that her prosecution and conviction will have a consideration for her image.

The judges also realized that Martha Stewart was a public figure, and accordingly, they dealt with the case and the scandal very carefully. They straightforward declared that the public figure nature of the reputation of Martha Stewart had indeed put more weight on them, to come to the correct judgment regarding her misconduct. This was because her sheer popularity would deter the future felons to keep from such misconducts and corporate malfeasance. Accordingly, they went to considerable lengths to prove the innocence of Martha Stewart if it were possible. However, they could not bring up any evidence that would prove that the share stocks were sold under the preordained stop-loss order. The jury ascertained testimonies from the stock brokers of Martha Stewart at Merrill Lynch but found that there was no truth in her assertion that the stop-loss orders were standing.

On the contrary, the jury found that there were no stop-loss orders and the stocks were only sold on the basis of private and nonpublic information available to Martha Stewart. Martha Stewart was informed that the company's CEO was also closing his positions due to the knowledge of the fact that the Food and Drug Administration (FDA) would not approve the new drug developed for cancer prognosis. Hence, Martha Stewart had insider trading to act on it, and she did to her disadvantage. Still, it has been estimated that if she had sold the stocks only three days later, she would have nonetheless made a profit without engaging in insider trading. However, her profits would only be lower by $48,000 (UNM, n.d.).

Answer 2

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