Decorating diva Martha Stewart, who has brought good taste and beauty into the lives of millions of middle-class women, has just been found guilty of obstruction of justice in Manhattan federal court. Martha’s crime: she failed to help the government build a case against her on another, more serious charge–insider trading of stock–that the government never lodged against her or even could have lodged against her under existing securities laws. As The Other Charlotte and I see it, today’s jury verdict against Martha wasn’t about obstruction of justice. It was about a travesty of justice.
The jury was apparently persuaded by the prosecution’s argument that Martha had sold off her shares of IMClone biotech stock in December 2001 after learning from someone at her brokerage house that her pal Sam Waksal, then president of IMClone, had dumped his own shares on learning of a pending adverse ruling from the federal Food and Drug Administration on an IMClone product. Then, said the prosecution, Martha lied about the circumstances of her IMClone sale–hence, the obstruction of justice rap.
Trouble is, under existing interpretations of federal securities laws, Martha didn’t do anything illegal by merely selling off the shares, even if she did learn something about Waksal’s move from her broker, Peter Bacanovic (who was also convicted on four related counts today). Why? For a stock transaction to amount to illegal insider trading under existing law, the trader has to be either a genuine corporate insider (which Waksal was, and he was eventually convicted of insider trading) or a “tippee”: someone who learns the inside information from a corporate insider, either directly or indirectly. Government prosecutors knew they could never trace the information Martha got from her broker back to Waksal or anyone else at IMClone–because there was absolutely no evidence to that effect–so they never bothered to charge Martha with insider trading.
But they wanted to get her on something, apparently–so they settled on charging and convicting her of fibbing instead. The prosecutors also threw in another bogus charge–that Martha’s proclaiming her innocence to the press amounted to an illegal effort to prop up the stock of her own company, Martha Stewart Living Omnimedia Inc.–but that charge was mercifully thrown out.
I don’t understand why anyone is under any obligation to cooperate with the government in an investigation of a non-crime. So TOC and I are rooting for Martha in her appeal. Here’s her statement, courtesy of National Review Online’s The Corner. Martha, we wish you all the luck in the world.