Martha: She Made the Mistake of Being a Self-Made Billionaire

Ludwig von Mises Institute ^ | Posted March 6, 2004 | William L. Anderson and Candice E. Jackson

[g_f_axelsen]

The Martha verdict appears quite popular with the political classes and the vaunted "man on the street," not to mention the nation's mainstream journalists.  The post-trial comments of one juror, Chappell Hartridge (Juror Number Eight), say it all: "Maybe this is a victory for the little guys who lose money thanks to these kinds of transactions. Maybe it's a message to the big wigs."

Remember that this was not a trial about "insider trading."  The judge said so, the prosecutors said so, the pundits said so.  Even the New York Times declared that it was not an "insider trading" charge.  Crowed the Gray Lady's March 6 lead editorial:

Absent a straightforward insider-trading charge, the jury was left to determine that there had been an illegal cover-up — and on that, the evidence was compelling — without defining the underlying impropriety. Still, the narrative that emerged at the trial justified the government's determination.

Juror Number Eight even admitted as such, answering a reporter's question with: "Well, as I understood it we weren't supposed to consider insider trading."  So there we have it; it was a trial about "cover-ups" and changed stories and a conspiracy to tell the government investigators something that the government did not want to hear.

Yet, in reality, it was a trial about "insider trading."  If we dig even deeper, we find that underlying the entire event was the theme that Stewart's station in life somehow was illegitimate, or at least she had no right to the alleged position of privilege that her money brings her.  Should Juror Number Eight's words, as well as those of the editorial board of the New York Times mean anything, Martha Stewart ultimately was convicted of being "wealthy beyond a reasonable doubt."

Consider the following statement in the Times' editorial: "The trial depicted a cozy world where insiders routinely use their wealth and connections to benefit from insider information."  Having followed the trial in some detail, I cannot recall such a scenario.  In the aftermath (and even before the trial began), people were aware that ImClone CEO Sam Waksal sold his stock upon learning that the Food and Drug Administration had given a thumbs down on its drug Erbitux (a decision that the FDA later reversed, yet another sordid episode to this story of government overreaching).

According to the government's charges, Stewart's stockbroker, Peter Bacanovic, was also Waksal's broker, and he got a message to Stewart that his client was dumping his ImClone stock and that she should do the same.  As James Ostrowski has pointed out, that is not insider trading.  If Baconovic tipped off Stewart to Waksal's actions – as the jury apparently believed – at worst he was guilty of violating Merrill Lynch's policies of confidentiality and he deserved whatever punishment his employer would mete upon him.

Furthermore, according to the record, Stewart unsuccessfully tried to reach Waksal herself, another example of what the Times calls the "cozy world."  So, according to the Gray Lady's editorial board, if well-known corporate CEOs talk to one another (or at least have the phone numbers to the executive suites), that constitutes an "unfair advantage" that permits such people "to benefit from insider information," a state of affairs that meets with the Times' sternest disapproval.

However, let us put the shoe on a different foot.  One of us worked as a newspaper journalist and at times had direct contact with reporters from the New York Times.  Indeed, as those on the "outside" soon discovered, there was a "cozy relationship" between people in political power and journalists from the Times, Washington Post, and the national network news outlets like ABC and CBS.  Such relationships permitted reporters from those news organizations to gain access to people who would not give the time of day to the rest of us.

No doubt, such access to newsmakers gives journalists from the Times and other elite organizations a real advantage, not only in gaining prestige but also wealth.  In other words, according to the editors of the Times, there is nothing wrong with journalists from the Times having access to top people – often at the expense of the "little guys" slugging it out at smaller newspapers – but it is immoral for Martha Stewart to have access to the offices of a Sam Waksal.  To put it another way, it depends upon the "cozy world" of which one speaks.

According to our vaunted "Juror Number Eight," Stewart and her co-defendant were "arrogant."  He cited their not appearing on the witness stand somehow as proof of their arrogance – for which conviction apparently was a remedy.  His statements to the press express that sense of entitlement: "It bothered me that they only put one witness on the stand. It's like they were saying, 'I don't need to defend myself. I don't need to persuade the jury. We know we'll get off.'"

Moreover, Stewart's privileges as a CEO further stoked his fire.  Consider this exchange between Mr. Number Eight and Andrea Peyser of the New York Post, a reporter who wrote shrill anti-Stewart screeds, and whose editors obviously wanted Stewart "taken down a notch".  (The following comes from Elizabeth Koch's dispatch in Reason Magazine's website, March 5.)

(Hartridge)  It was kind of…"

"Arrogant?" Andrea Peyser asks hopefully.

(Hartridge)  "Yeah," he says. "Judging by some of the things they did, I'd say they thought they were special. I wasn't comfortable with the tone of [Peter Bacanovic's taped SEC testimony]. He sounded kind of…"

"Arrogant?" Andrea asks, nodding emphatically. "What about the fact that Martha charges her vacations to the company? Did that play into your decision?" What, Andrea, do you want him to admit the conviction was motivated less by evidence than character assassination and vengeance?  (Koch's comments)

"Yeah. She takes vacations and doesn't pay for them—it's like she thinks she's better than everyone else. But, I mean...the vacations didn't factor into our decision."

         "What are you thinking of in terms of insider trading?" someone asks.

"Well, as I understood it we weren't supposed to consider insider trading. But as far as not talking to the authorities and not cooperating, yes, she sounded like she thought she was better than everyone else."

These words speak to the duplicity of the government's case against Stewart – and the dishonesty of the jurors, judge, and prosecutors alike.  Keep in mind that Martha Stewart now faces a lengthy stay in prison because jurors decided that the original activity – the alleged "insider trading" that never occurred – was a "bad act" that triggered their viewpoints about everything else that happened afterward.  Moreover, the jurors apparently remained convinced that Stewart had engaged in the "crime" of "insider trading," or at least something similar, since they believed she was trying to cover up something illegal.  They could not have reached their decision otherwise, as it would have been a logical absurdity.

To make matters worse, even before Stewart was able to unload her ImClone stock, numerous other nameless investors – many who most likely fell into the "little guy" category – already had sold their ImClone shares.  Stewart's actions impoverished no one, nor did she gain an "illegal" or even "unfair" advantage.  By the time she acted, the market already had spoken.

In one of its news dispatches following the trial, CNN declared that the Stewart case was part of the government's "crackdown on corporate corruption."  This is ridiculous.  Stewart was not a "corrupt" executive, nor did she break the law when she sold her shares of the temporarily doomed ImClone stock.

No, Stewart apparently committed the "crime" of being wealthy and well-connected.  Furthermore, she sometimes was short and impatient with people, which is a trait that one of us in his brief career as a news reporter found to be endemic in people who were associated with the New York Times and other "elite" news outlets. 

Had she instead been a journalist or a politician, she would have had a chorus of supporters among the political classes.  Instead, she made the mistake of being a self-made billionaire, and now the journalists and the political classes are making sure that she is railroaded into a prison cell.

[g_f_axelsen]

She made the mistake of being a self-made billionaire, and now the journalists and the political classes are making sure that she is railroaded into a prison cell.

[rdb3]

She made the mistake of being a self-made billionaire, and now the journalists and the political classes are making sure that she is railroaded into a prison cell.

She laid the tracks to the prison cell with her lies.

Show 'em my motto!

[billorites]

[Spok]

She should have stuck with cattle futures...oh, wait, that was somebody else...

[Stew Padasso]

"She laid the tracks to the prison cell with her lies."

When will those tracks make their way through DC?

[rdb3]

When will those tracks make their way through DC?

That's outside the purview of her case and you know it.

Show 'em my motto!

[miloklancy]

Martha Stewart made the mistake of behaving like a good old fashion aristocrat, who thought she could get away with anything. I don't see how being a self-made person got her into the mess she is in. In fact I don't think the nature of how she rose to the top has anything remotely to do with her problems. Although it might sound like a nice romantic self-made person gets hosed by the establishment story, it is hardly reality.

[Mudboy Slim]

"She made the mistake of being a self-made billionaire..."

No, she made the mistake of breaking the law...MUD

[Truth29]

What a prophetic cover for this case. If Martha Stewart ever gets locked up, she will come to grievous bodily harm or worse. The "little people" in prison will give her special attention o show her that she is not better than them.

[UCANSEE2]

She was convicted to keep the truth that politicians, board of directors, stock board members all use insider trading, but don't want the public to know, nor how much 'better' of a profit ratio those people make off their investments, as then they would lose the suckers that invest with no inside knowledge, as they are what makes it possible for the 'insiders' to make such huge profits.

They 'knew' this case could lead to the center of their spider den, and they didn't want that.

So, sacrifice the lamb.

[BrooklynGOP]

All for a measly $50k. I hate pettiness.

[_Jim]

She was convicted to keep the truth that politicians, board of directors, stock board members all use insider trading ...

Oh - so now she's gonna keep her mouth shut?

Sorry, but your statement would seem to defy logic ...

[HEY4QDEMS]

Welcome

[Agnes Heep]

Class envy is a nasty thing, and does no one any kind of good.

[cyborg]

Oh please Bill Gates is a self made billionaire. There are plenty of self made millionaires and billionaires who don't do what Martha did. She lied, and lied for a paltry $50,000 compared to BILLIONS she had already. I felt sorry for her at first but the longer people talk about this the less sorry I feel for her.

[MrsEmmaPeel]

She made the mistake of turning her company public. By doing so, all her actions came under heavier scrutiny. If she stayed private and sold the imClone stock even with insider knowledge, Feds couldn't touch her.

[Diddle E. Squat]

What a load of BS, and the same goes for Rush's similar ridiculous moaning today.

This is primarily all about the powerful and connected obeying the same law as anyone else, not class envy. If so many of the rich, famous, and powerfully connected were not routinely succeeding in their high price lawyers getting them off for what most people would go to jail for, the reaction would have been far more muted. Its no different than the reaction when OJ got hit with the civil judgement after walking on the murder case.

[Servant of the 9]

The laws under which she was convicted are bad laws and should be repealed, but they are the laws now.

The primary reason Martha was prosecuted is because the SEC cannot afford to have the example of a member of the board of directors of the NYSE getting a pass for any infraction.

The people who have responsibility for running the nations markets must be above reproach or eventually people will lose faith in the whole arangement.

So9

[BlueNgold]

g_f_axelsen
Since Mar 9, 2004

Welcome.

She made the mistake of lying, repeatedly, about a federal crime. She also, based on her position as a broker and as a board member, knew better. She knew the rules, and didn't follow them. She was given ample chance to ammend her statements, and then she was given several chances to plead out. This is no ones fault but Martha's. Sometimes people have to stand up and accept accountability for their actions. I, for one, am tired of people making excuses for celebrities they admire.

[Chameleon]

The fact that Martha is a big CEO and NYSE icon rightfully makes her a bigger target than the average guy.

But where Martha Stewart really went wrong was when she lied and conspired against the feds. Lie to them, and they take it personally. Federal prosecutors always roll hard on someone that they can prove is lying to them.

If Martha Stewart was not a celebrity, but just another well-connected CEO, the exact same thing would have happened...But we wouldn't hear people crying about it.

The defenders of Martha are star struck and aghast that a celbrity could go to jail over something as trivial as lying to federal prosecutors and conspiring to obstruct their inevestigation.

But None of Martha's defenders would be crying about a well-connected non-celebrity male who was sent to the pen under identical circumstances.

[rdb3]

They 'knew' this case could lead to the center of their spider den, and they didn't want that.

So, sacrifice the lamb.

You speak as though she's innocent. She's not, and is certainly no "lamb."

Show 'em my motto!

[Hildy]

And that makes you happy?

[Servant of the 9]

But where Martha Stewart really went wrong was when she lied and conspired against the feds. Lie to them, and they take it personally. Federal prosecutors always roll hard on someone that they can prove is lying to them.

The law against lying to the Feds, when not under oath is preposterous. They insist on working from notes and not using recording devices of any kind. Everyone is at the mercy of any agent 'remembering' things to suit his prior suspicions.

If there is ever any reason for federal agents to want information from me, I will stand mute until before a Grand Jury and give my answers there.

So9

[philosofy123]

She also made the mistake of lying and cheating.

[VRWCmember]

Welcome to FR. Cry me a river for Martha.

miserable failure
miserable failure
miserable failure
miserable failure
war criminal

[11th Earl of Mar]

I remember when in America when the rich were free to lie to the police and federal investigators.

But today our freedoms are gone. Pretty soon, no one will be free to lie, cheat and steal.

[<1/1,000,000th%]

The Martha verdict appears quite popular with the political classes and the vaunted "man on the street," not to mention the nation's mainstream journalists.

All I've seen from the media is that she shouldn't have to go to jail. She's one of their own.

[Conspiracy Guy]

Hitler made the mistake of over extending his resources on two fronts.

CG

[Pan_Yans Wife]

Happiness has nothing to do with appreciating that someone will pay their full debt for their actions. In the same vein, sadness will not acquit her of her crimes.

[11th Earl of Mar]

If Martha Stewart ever gets locked up, she will come to grievous bodily harm or worse.

If Martha gets locked up, she will be at some private prison on a 9 hole golf course. I don't think she will be seen cavorting with many little people.

[Truth29]

"And that makes you happy?"

Not at all. I am pointing out that the likely consequences of her conviction will go far beyond what is being talked about in the media - never mind the economic distruction this decision is causing. She is being described in the same league with the WorldCom and Enron looters who stole millions and billions from their companies. Stewart did nothing corrupt regarding her company at all. This whole case is about a stock trade and her conviction for covering up the circumstances of the trade.

[Hildy]

Oh, I agree with that.

[xusafflyer]

Here is the headline you WON'T see.

-----

No, Ken Lay apparently committed the "crime" of being wealthy and well-connected.

[Helms]

A "billionaire" ???- On paper maybe and in the past.

[Fawnn]

I remember when in America when the rich were free to lie to the police and federal investigators.
But today our freedoms are gone. Pretty soon, no one will be free to lie, cheat and steal.

Yeah. There's at least one rich guy who thought that since he got away with murder, he could get away with stealing his satellite TV service, too! ;)

[xusafflyer]

Stewart did nothing corrupt regarding her company at all.
---

Do you really believe that Martha never did this type of activity before as a broker or within her own company? I highly doubt it.

[UCANSEE2]

Allow me to explain.

Of course she won't keep her mouth shut, after being convicted.

BUT, no one will believe anything she would say now.

And the point was not to keep Martha quiet (the cat was already out of the bag on her using insider info), but to keep the media from investigating or designated branches of the Federal or State government at the behest of the media and public. Since they prosecuted Martha, all need to find out 'why she got away with it' disappeared.

She told the wrong person that "She was so big, no one would actually do anything to her for using that insider info", so it was decided to let the hatchet fall on her neck to prove to her she wasn't that big, and keep investigation of any other insider trading to ZERO!!!!!!!!!!!!!!!!

And it worked.

[SandyInSeattle]

All she had to do was tell the truth. She would've gotten a slap on the wrist and it would be yesterday's news. I keep telling my daughter, just tell the truth. It can't be worse than me finding out you lied later.

[billbears]

Furthermore, according to the record, Stewart unsuccessfully tried to reach Waksal herself, another example of what the Times calls the "cozy world." So, according to the Gray Lady's editorial board, if well-known corporate CEOs talk to one another (or at least have the phone numbers to the executive suites), that constitutes an "unfair advantage" that permits such people "to benefit from insider information," a state of affairs that meets with the Times' sternest disapproval.

However, let us put the shoe on a different foot. One of us worked as a newspaper journalist and at times had direct contact with reporters from the New York Times. Indeed, as those on the "outside" soon discovered, there was a "cozy relationship" between people in political power and journalists from the Times, Washington Post, and the national network news outlets like ABC and CBS. Such relationships permitted reporters from those news organizations to gain access to people who would not give the time of day to the rest of us.

I can't stand the woman. Don't like her one bit. That being said, this article is exactly right. Stewart did nothing that any other person out on the street would have done. Someone tells me that the owner of the company is selling their stock? Of course I'm going to sell my stock. And any hear that would tell you different are lying to your face. 'Cozy relationships' exist in every aspect of life. Stewart's action of selling the stock hurt no one

[Truth29]

"If Martha gets locked up, she will be as some private prison on a 9 hole golf course."

Not from what I have been hearing from the FoxNews "experts." They maintain she will get no special treatment and if she makes the mistake of still being "arrogant" or abusing any of her privileges like 10 minutes of phone time a day, things will go very hard for her.

[Hank Kerchief]

She lied ...

What lie?

When was she under oath?

Since there was no insider trading, what did she lie about?

Why do people hate success, especially when it doesn't grovel to every parasitic slime that crawls out from under the rocks to criticize when they think it's safe?

Hank

[decimon]

She laid the tracks to the prison cell with her lies.

From what I've read, she never lied under oath. LEOs can lie to us in the course of an investigation but we can be jailed for lying to them. Don't think I like that.

[UCANSEE2]

Not innocent, true.

Prosecutable yes.


Why her, though? Why not the others who routinely use insider trading to make much much more on their investments than YOU?

Well, now, we don't want the public knowing that the insiders use their knowledge to profit, which means they are STEALING FROM YOU, if you don't have the same insider info.

Must keep the game protected. Must keep the investing public happy so they invest their dollars, so we can make millions of dollars.

[an amused spectator]

Many people don't understand that almost anyone can be "gotten" by the "authorities" if it's deemed necessary.

A person with Stewart's means could hire enough "eyes" to put more than half the jury, or members of their families, in jail for felonies within five years. It would be inevitable, with the legal code becoming almost as complex as the tax code.

[Truth29]

If she did anything else, she certainly wasn't tried for it. Like juror number 8, you sound like you are convicting her of alleged crimes not before the court.

[Redleg Duke]

Looks like Martha Stewart has unleashed a troll onto Free Republic. "g_f_axelsen...member since March 9th, 2004".

[edsheppa]

I really, really detest intellectual dishonesty.

[Helms]

This was a case where Rush's 1.5% chance of being wrong kicks in. But also it is this as well:

Tragic flaw From Wikipedia, the free encyclopedia.

A tragic flaw, in literature is the one problem an otherwise perfect protagonist (often called the tragic hero) has, that eventually brings him down in the end.

The concept was created in ancient Greek tragedy. More often than not, the tragic flaw is hubris, such as in the works Antigone and Oedipus Rex.