Trial In Error
James K. Glassman makes a very good point -- "As Martha Stewart's trial moves into a third week, an important question remains unasked: Why are the feds prosecuting someone for receiving inside information, anyway? Isn't the criminal the corporate official who acts on knowledge that the public doesn't have?" He thinks the SEC should leave Martha alone and focus on the corporate-level crooks:
Although it's clear that top officers in a company are breaching their fiduciary responsibility if, for example, they buy stock with secret knowledge that their company is about to be bought by another firm, it's far from clear why someone like Stewart should even be considered for prosecution under the insider-trading law, which stresses misappropriation -- that is, using material, nonpublic information in breach of a duty of trust or confidence. Waksal was in a position of trust; Stewart wasn't.Also, who is hurt? Assume Stewart did know that Waksal was selling. That might have given her an edge over the buyer of her 3,928 shares, but the buyer was ready to buy on Dec. 27 anyway -- if not Stewart's shares, then someone else's.
In a book published in 1966, economist Henry Manne showed how insider trading actually makes markets more efficient because it speeds information that's immediately reflected in share prices. That's what we want from markets: a quick response to reality. In most other markets -- art, for instance, or cattle trading -- it is perfectly fine for one party to have inside information that the other does not. Prices ultimately reflect those facts, and prices are the way the public gleans knowledge.
Let's be honest about what Martha is really being tried for -- being rich, successful, and having bigger balls than a lot of men (albeit gilded, and trimmed with rickrack).
Actually, Martha's being tried for having a current stockbroker's license and still trying to pretend she doesn't know that insider trading is a crime. I'll agree that her success made her an all-too tempting target, but not only had she worekd as a stockbroker, she still renews the license. She tried to fudge her own phone log!
William at February 12, 2004 10:46 AM
You got to love this administration! Can't find Osama bin Laden, but by heaven, they nailed Martha Stewart!
Patrick at February 12, 2004 2:42 PM
Patrick--so, all federal prosecution should just stop during a military action? What does one thing have to do with another? Does the judicial branch just close up shop?
Roberto at February 13, 2004 8:38 AM
Insider trading does dupe the buyer of the stock -that's a point well taken. But the larger issue here is prevarication & purposely falsifying records to avoid prosecution. And this is what Martha Stewart is being charged with. Because she's female & powerful doesn't make it OK for her to lie &/or alter written records.
I personally have a difficult time getting worked up over insider trading charges. It seems like such a vague area - we all strive to gain insider information of one sort or another anytime we evaluate a stock transaction. I guess it's a matter of degree.
I can easily forgive Martha Stewart's stock sale, but not the subsequent awkward & embarrassing cover-up attempts.
Jack Yaco at February 22, 2004 10:37 AM