Case against Martha Stewart makes headlines, but is it worth all the attention?

Posted: Friday, November 01, 2002

NEW YORK (AP) -- This isn't about getting sympathy for Martha Stewart. If she is found guilty of insider trading, she deserves to be punished.

That said, it's still somewhat perplexing how big this scandal has become in the public eye, even with larger instances of corporate and executive malfeasance looming.

Sure, Stewart is the domestic design tycoon everyone loves to hate. But all this over an ImClone stock sale that, relatively speaking, didn't amount to much?

It makes you wonder if the Stewart case has spun out of control, and for an end result that probably won't have much effect.

The allegations against Stewart go like this: Federal investigators are trying to determine whether she had inside information before she sold almost 4,000 shares of ImClone stock for about $228,000 last December.

The New York Post said last week that her profits from the sale totaled $42,000, which The Associated Press could not confirm.

Securities and Exchange Commission lawyers have informed Stewart that the regulatory agency intends to pursue civil securities-fraud charges against her.

Stewart has maintained that she and her broker had a standing order to sell the shares if the stock dropped below $60, which it did the day she sold. The closing price that day was $58.30.

She has denied any wrongdoing and has not been charged.

It's easy to see how the public has gotten swept up in this case.

Stewart is one of the most well-known figures of our time, creating a billion-dollar lifestyle conglomerate with everything from magazines and television programming to home furnishings.

Now she's paying the price of fame. There's nowhere to hide on center stage. And her reputation for being controlling and curt only adds to the drama.

It also hasn't helped that Stewart has been tight-lipped with details in her case, especially to shareholders in her company, Martha Stewart Living Omnimedia. They've watched their holdings fall by more than 50 percent in value since the scandal erupted in June.

Add all that to a year plagued by numerous examples of corporate misdeeds, which have caused the public to rally for more serious punishments of executives involved in anything illegal.

But it's still worth questioning if this case is really worth the amount of attention it's getting.

Much more money is involved in other scandals still needing attention, including Enron, Tyco and WorldCom.

Making an example of Stewart might be understandable, but it's hard to be convinced that she is the worst offender in corporate America today.

That's not to say it's not a serious matter. Stockholders in both her company and ImClone have lost big money that may be impossible to get back. ImClone stock has fallen more than 80 percent since late December.

Regulators have to first decide if Stewart is guilty or innocent and then, if guilty, how to make the punishment fit the crime.

One possibility would be that the SEC forces her to step down from the helm of her company and pay a hefty fine.

But that still won't get her out of the business. She holds 62 percent of the company, making her the largest shareholder by far. And chances are, since the company is built around her ideas and her name, she will continue to direct much of what goes on.

Where this case goes from here is still to be decided. Regardless of its outcome, it seems many people have already made up their minds.

Stewart has become public culprit No. 1 for a year's worth of corporate scandals.


Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)

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