Martha Stewart Case Study

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Introduction Martha Stewart was indicted on charges of conspiracy, obstruction of justice and securities fraud. All linked to her sale of 3,928 ImClone Systems Inc shares on December 27, which considered as illegal insider trading by Security and Exchange Commision (S.E.C). Stewart cashed out her ImClone stake at an average price of $58.43, collecting about $229,500. After the market closed the following day, the Food and Drug Administration announced its refusal to review ImClone's application for Erbitux, a promising cancer drug. The next trading day, Dec. 31, ImClone's shares opened at $45.39 per share. That difference in price would have cost Stewart about $51,200 if she sold first thing that morning. However, she was not prosecuted for…show more content…
She pleaded not guilty and pledged to fight the charges. Although the charges of securities fraud were thrown out, Stewart was found guilty of four counts of obstruction of justice and lying to investigators. She was sentenced to five months of prison, five months of house arrest, and two years of probation. ImClone case was showing unethical and socially irresponsible behavior by business executives. They are in positions of power that allow them to do damage to others. This paper will evaluate the case above thoroughly, start from the prosecution’s arguments, the defense’s arguments. Analysis will be made using four ethical theories; Rights, Justice, Utilitarianism, and Profit Maximization. Prosecution’s Arguments Five counts have been filed against Stewart. The indictment against Stewart begins with a conspiracy count andalleges that Stewart and Bacanovic conspired to obstruct justice, make false…show more content…
Expectations are that the legal team will also argue that Stewart is being prosecuted for being who she is, not because of what she did. The lawyers were also asked the jury to question why a woman of such wealth would cheat or lie to prevent a mere $50,000 loss in her stake in ImClone. Maybe, the Stewart’s lawyer had succeded to throw out securities fraud charge but it was not because the First Amandment argument of right to free speech (First Amendment does not protect false statements of fact that are part of a course of criminal conduct ). Interesting legal technicality, Stewart did not necessarily breach a fiduciary duty to the other investors, since she had no real obligation to inform other investors, which would be the case if she were an officer with the company. The failure of prosecution to prove that Stewart made these statements with the intent to defraud, also being the reason why securities fraud was thrown out. Bring to the conclusion that there was no evidence of the necessary intent to mislead investors and bolster the value of her own company's stock. The judge, Miriam

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