What role has Martha Stewart’s image played in the insider trading scandal? 2. Will Martha Stewart...

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What role has Martha Stewart’s image played in the insider trading scandal? 2. Will Martha Stewart Living Omnimedia survive if Martha Stewart were to leave the company? In order to survive, what changes will need to be made at the company? 3. How has Martha Stewart’s conviction impacted the business environment today
	
Document Preview: Daniels Fund Ethics Initiative 
University of New Mexico 
http://danielsethics.mgt.unm.edu 
Martha Stewart’s Insider Trading 
Scandal 
INTRODUCTION 
Martha Stewart is one of the few business mavens who can still claim widespread popularity after a 
highly-publicized scandal. She is the founder and former CEO of Martha Stewart Living Omnimedia 
Inc., a company with interests in publishing, television, merchandising, electronic commerce, and 
related international partnerships. In the early 2000s, America’s most famous homemaker became 
the center of headlines, speculations, and eventually a federal investigation concerning her stock 
trading. Martha Stewart was accused of insider trading after she sold four thousand ImClone shares 
one day before that firm’s stock price plummeted. Although the charges of securities fraud were 
thrown out, Ms. 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.   
After her release from prison, Martha Stewart involved herself in a variety of ventures, including 
magazines, a short-lived reality television show “The Apprentice: Martha Stewart,” “The Martha 
Stewart Show,” and branded items sold by flower shops, KB Homes, and Macy’s. Martha Stewart 
still controls much of Martha Stewart Living Omnimedia. Even though she was barred from acting 
as director of the company for five years, Stewart continues to control about 50 percent of Martha 
Stewart Living Omnimedia Inc. stock and about 90 percent of voting stock. While it often takes 
many years for businesspeople to regain trust after corporate misconduct, Martha Stewart remains 
a beloved household icon for thousands of loyal fans. 
EVOLUTION OF A MEDIA EMPIRE 
Martha Stewart’s lucrative career includes stockbroker, caterer, business owner, and home living 
expert. Born in 1941 as Martha Kostyra, Stewart developed a passion for cooking,...

David · Accepted Answer

Running Head: MARTHA STEWARTS’ REVIEW
Martha Stewarts’ Review 1
Running Head: MARTHA STEWARTS’ REVIEW
Martha Stewarts’ Review
Name
Institution
Date
Role that Martha Stewarts’ Image has Played in the Insider Trading Scandal
There have been a number of major convictions and incarcerations from insider trading over the last decade. One of the most highly publicized cases was that of Martha Stewart. In the early 2000, the name Martha Stewart became a major headline in almost all media houses both print and electronic. She had been accused of participating in insider trading with ImClone Systems stocks. The founder and former Chief Executive officer of the Martha Stewart Living Omnimedia Company had sold off her stock in ImClone Systems, a bio-pharmaceutical company, a day before the stock prices for the company witnessed a significant drop. The reason for the in depth scrutiny by the media was because Martha Stewart was a high profiled individual who had established popularity from her high level of business acumen evidenced by her business empire.
The headlines accused Martha Stewart of making stock trades based on her access to material non-public information. Martha Stewart’s stockbroker, Peter Bacanovic, had contacted his client and told her that the chances of the highly valued stock were likely to plummet. This was because the Food and Drug Administration had rejected to review the company’s cancer drug, ‘Erbitux’. Bacanovic had received this information from his client Sam Waksal, who was the C.E.O of ImClones at the time.
The C.E.O of ImClone Systems, who was also a close friend of Martha Stewart, had instructed Peter Bacanovic to transfer $4.9 million worth of stock to his daughter’s stock account. The stock was then, to be sold to the public before the 7th day of December of 2000. Several other company executives had also sold off their shares before the 11th day of December the same year; including the company’s legal advisor John Lands and Ronald Martell, the company’s vice president of marketing. These were all transactions, which Peter Bacanovic was privy to.
When Martha Stewart sold her shares for the Bio-pharmaceutical company on the 27th day of December 2000, the investigative team from Merill Lynch argued that the event was too coincidental to be ignored. Martha Stewart, like most of the senior management personnel at the ImClone Company could gain access to information regarding major financial decisions for the company. In addition, she was a person of influence who could easily exact her influence on the employees who worked in the Bio-pharmaceutical company. Furthermore, the investigators from Merill Lynch had scrutinized Martha Stewart’s email and telephone records, found evidence that revealed Bacanovic had contacted Martha on December 27th, and ten minutes later Martha Stewart’s stocks had been sold to the public.
Concerning this evidence,

What role has Martha Stewart’s image played in the insider trading scandal? 2. Will Martha Stewart Living Omnimedia survive if Martha Stewart were to leave the company? In order to survive, what...

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