Overcoming my initial inclination to shadenfreude I have to weigh in as rather disgusted withthe current situation with Martha Stewart. Let's see here. The government begins an investigation into her for insider trading because her broker told her that the head of imclone was trying to dump his stock. (OK -- Broker is now in BIG trouble (job gone, license gone, etc). But what about Martha? All she was alleged to have known was that Waksal was dumping his stock -- not why. Any reasonable securities lawyer should have told her to simply tell the feds just what happened. No way is she going down for insider trading on those facts. Forget about "tippee" liability. The tippee has to KNOW the information was confidential inside information AND that it was provided to them in violation of a duty by the person who provided it. Now Martha might have known her broker should not have told her about Waksal's stock dealings, but knowing that the stock trades of Waksal was confidential information is very sketchy.

So Feds realize they have no insider trading case. But what they do have is somebody who got skittish in the face of a federal investigation in a climate where the feds are looking for scalps under a theory of law (insider trading) that has been aggresively expanded by the SEC with complacent courts going along for the ride. They look at everything she said and decide that she must have lied to them about a charge they could never make stick in the first place. What a wonderful way to do business for the government. I predict an acquital and I hope she fights like hell.


- posted by Anonymous @ 9:24 AM