TruthNews Commentary, March 7, 2004

With the daily coverage of corporate scandals such as Enron, Worldcom, and Tyco, it's truly satisfying that one of these corporate malefactors has finally been brought to justice. Yes that's right, folks, that notorious corporate swindler, financial finagler, and stock market manipulator Martha Stewart is going to jail.

For those of you who think of Martha Stewart as a television personality and magazine publisher, it may come as a surprise that she ranks with such corporate malefactors as Enron's Kenneth Lay and Jeffrey Skilling and Tyco's Dennis Kozlowski and Mark Swartz. Actually, Stewart's worse than these guys, because she's the only one of the five who's actually been convicted.

Many people may have heard the Stewart was charged with insider trading. Wrong! The government accuses her of plotting with her Merrill Lynch broker to cover up an insider trade (conspiracy); lying to investigators about it (false statements to federal agents and obstruction of justice); and misleading investors by falsely proclaiming her innocence (securities fraud). But the government has not charged Stewart with the crime that she's accused of covering up and lying about - to wit, insider trading.

Here's the history: Stewart sold 4,000 shares of ImClone stock on Dec. 27, 2001, shortly before the company announced that it had failed to get the Food and Drug Administration's approval for a new cancer medicine. The government says Stewart sold her ImClone shares because she knew ImClone CEO Sam Waksal was selling his. Stewart claims her broker told her to sell. Waksal is serving a seven-year sentence on several charges of security fraud related to ImClone stock. But Stewart could not be charged with insider trading because... duh... she's is not an ImClone insider.

Stewart and her broker, who was convicted with her, insist she sold the ImClone stock because they had agreed she should once the price dropped to $60. The prosecution's main witness was Stewart's stockbroker's assistant, who testified that he passed on the tip about Waksal. Of course the informant, Douglas Faneuil, will go scott free in exchange for ratting on Stewart. Stewart's attorneys have done a pretty good job of discrediting Faneuil, noting that he's an admitted liar, pointing out inconsistencies in his statements, arguing that aspects of his account were implausible, and suggesting that he is lying in exchange for the government's leniency.

So the task of the jury was to figure out who was telling the truth -- Stewart and her broker, or the broker's assistant, and admitted liar who testified in exchange for immunity. Not surprising, the jury decided that - Martha Stewart was the liar.

There are two troubling aspects about this. First, faced with two contradictory stories and no substantiating evidence, how could the jury conclude that the evidence proved, "beyond a reasonable doubt," that Stewart lied. Second, even if Stewart did lie, why is this a crime? The feds can charge someone with obstruction of justice if they lie to cover up a crime. In this case, there was not crime that they were covering up - lying was the most serious, and only crime, that they were charged with.

Even U.S. Attorney David Kelly admitted to reporters after the conviction that the case centered on false statements to investigators. "When we first indicted this case, we said it was all about lies. It was all about lies. And as you saw in the evidence, that is what it was," he said. "The victims in this case [are] the entire American public who rely on the integrity of this system to make sure that justice is done and they can invest their money safely and securely and know that it has been handled honestly." Gee, Dave, I feel safer already, knowing that the liars are off the street. Now I can invest my money safely and securely with companies like Enron and Tyco - no, wait, those crooks are still walking around free.

Besides, the feds weren't too concerned about another notorious liar, Bill Clinton. Clinton lied under oath while serving as president. He lied in a lawsuit charging him with sexual harassment. And he admitted lying under oath! But he was never indicted, never prosecuted, and never convicted. Perjury under oath in a court of law is a much more serious offense than lying to a government official.

Ironically, the judge presiding over the trial of Martha Stewart dropped the most damaging charge, securities fraud. Stewart was accused of trying to deceive investors in her own firm, Martha Stewart Living Omni-Media, when she denied allegations that she had sold shares of ImClone based on insider information. The prosecution argued that Stewart's comments were aimed at keeping up the stock price of her company. But U.S. District Judge Miriam Goldman Cedarbaum threw out the charge, which carried a potential 10 year prison sentence and $1 million fine. Cedarbaum said the evidence presented by the government was too weak to prove "criminal intent." In her 23-page ruling, Judge Cedarbaum said "no reasonable juror can find beyond a reasonable doubt that the defendant lied for the purpose of influencing the market value of the securities of her company."

Justice depends on the prosecutor, grand jury, judge, and jury each behaving fairly and honestly. It isn't the job of any of these to pass the buck to the next step - if they do, the system of checks and balances that our justice system is built on is destroyed. If the evidence doesn't support a guilty finding, the prosecutor shouldn't prosecute, the grand jury shouldn't indict, the judge shouldn't allow the trial to go forward, and the jury shouldn't convict. In the Martha Stewart case, we have a showboating prosecutor who doesn't care about the law, a rubber stamping grand jury that believes whatever the prosecutor presented, a spineless judge who refused to do his duty by dismissing the charges, and a weak-minded jury who decided the case based on vindictiveness rather than the evidence.

There's one good thing about Martha Stewart's conviction. Now the federal prosecutors and FBI can stop wasting their time on sending a celebrity to jail for a non-offense and can back to prosecuting terrorists and murderers. No wait - Stewart's appealing, so that'll tie up the feds for another year. So the terrorists and murderers will just have to go free - the feds have more important work to do.