Essay on "Insider Trading on June"

Essay 7 pages (2244 words) Sources: 7

[EXCERPT] . . . .

If publicity was the mission of the SEC, it benefited significantly when Stewart refused to plead out. Most defendants in such cases will plead guilty to avoid the trial and possible prison sentence; Stewart opted for the trial. This, naturally, gave the SEC a bigger stage (Moohr, 2006). The case garnered publicity every step of the way, and the fact that Stewart was convicted and served time boosted the SEC's reputation and helped to restore public confidence in the security system. That the prosecution was largely inconsequential was not important. The SEC had pursued charges against the executives at Enron, WorldCom and others, and Stewart had joined them as emblematic of a culture of greed and corruption in Americas' boardrooms. Had Stewart not been a CEO and not been a public figure, the case would probably have never gone to trial and would not have contributed anything to the SEC's image. Multiple academics as cited above have supported the idea that Stewart was specifically targeted to make a point, rather than as a point of fairness in securities law. She would, of course, have been prosecuted no matter who she was because she committed a crime. However, the conflation of her crimes with insider trading gave the case the boost it needed in the media to spur significant effort on the part of the SEC to prosecute Stewart.

Conclusion

The facts of the case are documented in particular in legal journals. Even this occurs because of Stewart's public profile. Writing about Stewart gives journals and academics credibility the same as prosecuting her did for the SEC. However, the academic community has been highly critical of Stewart's treatment by the regulators. In particular, the fact that she was signaled out as a CEO and the fact that the SEC announcement this are both interesting developments that make this case unique. The whole point of laws concerning securities fraud is that in investing everybody should have a level playing field. What does it say for level playing fields when one's celebrity status (or role as a CEO) subjects one to extra-vigorous prosecution from the government? Surely there is something ironic in the prosecution of Martha Stewart.

That said according to the letter of the law she was guilty, and she was found as such by a jury of her peers in federal court. Sufficient evidence was presented that the broker had conveyed to Stewart that the trades needed to be covered up, and that Stewart participated in this. She knew that there was ethical if not legal issues with the trades and needed to defend against prosecution. The Stewart case, then, is not as much a securities fraud case as it is a business ethics case. While the prosecution of the case is fascinating to the legal community, the business community can take away the ethical issues. Stewart as CEO put her own company at risk through her actions. It was the actions of executives that also undermined WorldCom and Enron, so there is a common thread between these different high profile cases. Stewart's moment of indiscretion was damaging to herself personally, but it also showed a lack of judgment that many investors do not want to see in their CEOs. If she wasn't the CEO of her own company, such indiscretion might have been more costly both for her and the company, but as it was both recovered once she was able to resume her duties following her sentence. Prosecutors, for their part, helped to restore faith in the investing system in America by pursuing Stewart so vigorously for these minor crimes.

Works Cited:

AP. (2004). Martha Stewart convicted on all four counts. Fox News. Retrieved April 13, 2013 from http://www.foxnews.com/story/0,2933,113417,00.html

Heminway, J. (2003). Save Martha Stewart? Observations about equal justice in U.S. insider trading regulations. Texas Journal of Women and the Law. Vol. 12 (247).

Moohr, G. (2006). What the Martha Stewart case tells us about the white collar crime. Houston Law Review. Vol. 43 (2006).

Podgor, E. (2005). Jose Padilla and Martha Stewart: Who should be charged with criminal conduct? Penn State Law Review. Vol. 109 (Spring 2005).

Rasmussen, H. (2013). Insider trading. About.com. Retrieved April 13, 2013 from http://economics.about.com/cs/finance/a/insider_trading.htm

Schroeder, J. (2005). Envy and outsider trading: The case of Martha Stewart. Cardozo Law Review. Vol. 26 (April 2005).

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