Sucheta Dalal :Another view on Martha's case
Sucheta Dalal

• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal


You are here: Home » What's New » Another view on Martha's case
                       Previous           Next

Another view on Martha's case  

June 6, 2003

William Safire of The New York Times has an interesting new take on the Martha Stewart case. In an article titled "Fight it Martha" he argues that prosecutors are stretching the law to make an example out of the celebrity businesswoman. A far cry indeed from the Indian situation where celebrity-industrialists are never punished.

Read on:

I hope Martha Stewart beats this bum rap.

Not for the reason some feminists are advancing — that she is being brought down because she is a strong woman succeeding in a man's business world, while so many male corporate predators go scot-free. The seven-year jail sentence given to her friend Samuel Waksal, former chief executive of ImClone, belies that.

Nor do I join the millions clucking sympathetically at her Web site who believe she was blameless in trying to call her friend Samuel. She may well have been improperly seeking news of impending events that might cause the value of her investment in his company to drop.

I hope she beats the rap because I don't like the idea of a prosecutor — eager to deter others from doing wrong — twisting the law to make an example out of a celebrity. In doing justice, righteous ends don't justify unscrupulous means.

The U.S. attorney has not accused her of the crime of insider trading. After a yearlong investigation, that central matter is nowhere in his indictment.

Why not? Because he decided that would be too difficult a charge to persuade a jury to believe. (In the Hillary Clinton Travelgate case, the independent counsel Robert Ray concluded that her sworn testimony was "factually false," but he declined to prosecute because he didn't think a jury would convict the first lady of perjury. Prosecutors hate to spoil their records.)

Rather than drop the weak case and his chance at national fame, the prosecutor James Comey handed off the insider-trading charge to the S.E.C., which seeks civil damages, not criminal penalties, and must meet a much lower standard of proof.

Instead of focusing on what the case is about, Comey told a rapt press conference: "This case is about lying" — to investigators and to investors.

"Lying" is a harsh word; I used it myself about Mrs. Clinton's congenital falsification. But "perjury" is a much harsher word, meaning "lying under oath." Martha Stewart has not been accused of perjury.

Why not? Because when she voluntarily answered the questions of investigators, she was not under oath and could never have perjured herself. To make a case, the prosecution stooped to the use of Section 1001 of the criminal code, which makes it a crime to knowingly and materially mislead federal investigators. Prosecutors use it to beef up weak indictments, and judges often dismiss that count first.

The most troubling and radical charge of all came, almost as an afterthought, at the end of a 41-page indictment. It twists a protestation of innocence into "lying to investors."

Last summer, a week after Waksal had been arrested for fraud, Stewart — who had been subject to a series of gleeful leaks about her impending doom — dared to tell an investors' conference that her sale of stock was perfectly legal and that she was cooperating with investigators. She also proclaimed her innocence in some detail to The Wall Street Journal.

That, charges the government, was a crime. Although common sense suggests that mounting a public defense was the natural thing to do for a person being anonymously smeared, the prosecutor reads a sinister motive into her speaking out: she was not trying to salvage her personal reputation, but was instead pumping up the price of the stock of the company that bears her name.

Why such a stretch? The purpose of attributing a nefarious intent to the accused executive's public self-defense is to create victims for a jury. When investors saw her display a certain gutsiness in the face of adversity, her stock rose $2; the prosecution calls that securities fraud, suckering investors, and worthy of jail time.

Hold on; is Martha Stewart a person or a walking corporation? Even a world-famous "domestic diva" has a right to speak out in personal defense of her reputation. Even a wealthy woman who created a company that employs thousands and generates taxable profits is entitled to act like a jerk on occasion without risking a charge of being a criminal conspirator.

The message this selective prosecution is sending executives is not "don't lie"; rather, it is: Don't explain your side to investors or the press lest it land you in court for manipulating your stock. Wrong message. Fight it, Martha.  

-- Sucheta Dalal


Recent Comments