Study The Trial of Martha Stewart case on page 229 of course text. “Was her punishment, including both imprisonment and fines, appropriate?”
From indictment to sentencing, the case of Martha Stewart was a matter of intense public interest. Some thought that her misdeeds, if any, were slight. Cynics believed the government was prosecuting a celebrity for a minor infraction to show it was tough on business crime. An indignant Wall Street Journal com-plained that innocent employees and shareholders of Martha Stewart Living Omnimedia were paying the price for the government’s zeal. 1 Feminists argued that she was picked on for being a successful woman. “It’s hard to imagine a male in precisely this spot,” said Mary Becker, a DePaul University law professor. “Targeting a successful woman is very consistent with dominant cultural values.” 2 Others believed that her prosecution was justified. “I don’t buy any of it,” wrote Scott Turow, a criminal defense lawyer and the author of best-selling legal fiction. “What the jury felt Martha Stewart did—lying about having received inside information before she traded—is wrong, really wrong.” 3 This is the story. DECEMBER 27 On the morning of Thursday, December 27, 2001, Douglas Faneuil was on duty at the mid-Manhattan office of Merrill Lynch. Faneuil, 24, who had been in his job only six months, assisted a stockbroker named Peter Bacanovic. It was two days after Christmas and Bacanovic was on vacation. Staffing was thin and Faneuil expected a slow day with light trading. Soon Faneuil took a call from Aliza Waska. Aliza was the daughter of Samuel Waksal, co-founder of ImClone Systems, a biopharmaceutical company. She wanted to sell her ImClone shares. Faneuil executed the order and by 9:48 a.m. her 39,472 shares had been sold for $2,472,837. Then Faneuil had a call from Samuel Waksal’s accountant requesting that another 79,797 shares held in his Merrill Lynch account be transferred to Aliza’s account and then sold. The call was followed by a written direction saying that making the transfer and sale that morning was imperative. Faneuil sought help on the transfer and called Peter Bacanovic in Florida. Bacanovic, 39, was an old friend of Waksal’s. He had worked at ImClone for two years before coming to Merrill Lynch, and he handled the personal accounts of Waksal and his daughter. When Bacanovic learned that the Waksals were selling, he instructed Faneuil immediately to call another of his clients, Martha Stewart, while he remained on the line. Bacanovic, who was active in New York social life, first met Martha Stewart in the mid-1980s when they were introduced by her daughter Alexis. Stewart was one of his most important clients. He handled her pension and personal accounts. He also handled accounts for her company, Martha Stewart Living Omnimedia, Inc. At 10:04 a.m. Faneuil dialed Stewart, but reached her administrative assistant Ann Armstrong, who said Stewart was on an airplane. Bacanovic left a brief message, asking Stewart to call back when she became available. In her phone log, Armstrong wrote, “Peter Bacanovic thinks ImClone is going to start trading downward.” Bacanovic instructed Faneuil that when Stewart called back he should tell her that the Waksals were selling all their shares. At this time ImClone was priced at $61.53 a share. This instruction from Bacanovic bothered Faneuil. Merrill Lynch had a written policy (see Exhibit 1) that required its employees to hold client information in strict confidence. But he was very busy and working under a sense of urgency, handling calls from the Waksals, and making calls to Merrill Lynch staff in several offices arranging the transfer of Sam Waksal’s shares to his daughter. Several hours later, Stewart’s plane landed in San Antonio to refuel. She went into the airport and on her cell phone called Ann Armstrong to check for messages. At 1:39 p.m. she phoned Merrill Lynch, reaching Faneuil, who told her that Sam Waksal and his daughter had sold all of their shares. She asked for the current price of ImClone. Faneuil quoted ap-proximately $58 a share. Stewart told him to sell all 3,928 shares she owned. Discussion Rubrics Discussion Rubrics Discussion Rubrics Criteria Ratings Pts This criterion is linked to a Learning Outcome Clarity and Professionalism 10 pts Successfully Accomplished- Careful and concise writing. Language is clear, precise, and grammatically correct. Clearly follows teacher’s instructions. 6 pts Partially Accomplished- Language is mostly clear and grammatically correct, but lacked specificity. 0 pts Not Accomplished- Language is vague and/ or incorrect grammar and sentence structure interfered with message clarity. 10 pts This criterion is linked to a Learning OutcomeKnowledge and Insighfulness 20 pts Successfully Accomplished- Responses reflect deep understanding of concepts and are well supported with specific examples from the assigned materials. Responses are insightful and reflect appropriate application of concepts to the particular context addressed in the assignment questions. 12 pts Partially Accomplished- Responses reflect basic knowledge of concepts, but did not fully support them with specific examples from the assigned materials. Responses are mostly correct, but do not fully demonstrate insightful reflection or application of concepts. 0 pts Not Accomplished- Responses failed to reflect basic understanding of the assigned readings and/or materials. 20 pts Total Points: 30