How could Martha Stewart be guilty of a crime when there was no crime?
Doesn’t matter, does it if the government is wrong?
So…. Was Martha guilty? Guilty of Insider Trading? No. She wasn’t charged with insider trading. Why not?
The government didn’t charge Ms. Stewart with insider trading, although it was not for lack of trying, but, rather, for lack of evidence. While the state’s case began with an insider trading investigation, it failed to prove that Ms. Stewart received—or that Mr. Bacanovic her stock broker imparted—insider information. The message she got from him via her assistant was commonplace. It was, simply, “Peter Bacanovic, (her broker) thinks ImClone is going to start trading downward.”
The crucial fact is: Martha Stewart was never an ImClone “insider.” Hers was a private sale—she sold the shares of a company to whose shareholders she had no fiduciary duty. Mr. Bacanovic, on the other hand, was contractually bound by Merrill Lynch’s confidentiality and privacy policies to refrain from divulging such information to her which he did not.
If he did indeed tell her that Sam Waksal was selling his ImClone stock, and this was contrary to Merrill Lynch’s policies, Bacanovic was in breach of his obligation to the company. Bear in mind, though, that a company’s rules about insider trading are informed by federal and State securities laws. If insider trading were not criminalized by the government, it is entirely possible—even probable—that Sam Waksal would have been more than pleased to authorize the release of the information to his long-time friend Ms. Stewart (or done so personally).
When it became apparent to U.S. Attorney David N. Kelley that he could not charge Ms. Stewart with insider trading, he used the unrehearsed interviews she had given law-enforcement officers—interviews not subject to Fifth Amendment protections—to charge her with conspiracy, obstruction of justice, and lying to investigators about a matter that was never a crime.
This entrapment was easily facilitated under the dangerous unconstitutional Section 1001 of Title 18 in the United States Code. This makes it an offense to make “a materially false” statement to a federal official—even when one is not under oath. (It is perfectly acceptable, however, for said official to bait and bully a private citizen into fibbing.) Section 1001 neatly accommodates a plethora of due-process violations. That’s called a one-way ratchet. You can’t win but you can lose. Stewart lost a fight which she never was in. HERE.
If he did indeed tell her that Sam Waksal was selling his ImClone stock, and this was contrary to Merrill Lynch’s policies, Bacanovic was in breach of his obligation to the company. Bear in mind, though, that a company’s rules about insider trading are informed by federal and State securities laws. If insider trading were not criminalized by the government, it is entirely possible—even probable—that Sam Waksal would have been more than pleased to authorize the release of the information to his long-time friend Ms. Stewart (or done so personally).
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