The trial and subsequent conviction of Martha Stewart on March 6, 2004, was as a result of insider trading and her attempt to cover it up. On December 27, 2001, she received a call from her stock broker’s assistant in regards to 3,928 shares that she owned in a bio pharmaceutical company called ImClone systems. She was informed that the co-founder Sam Waksal and family were selling all of their shares which prompted her to sell hers also. ImClone’s resources had been allocated for a decade into the development of a colon cancer drug named Erbitux. After executives received word from a source within the FDA that it wouldn’t be approved, knowing that once this info was made public the stock price would drop, Waskal decided to sell. Stewart’s broker insured that she received this information and would have the opportunity to sell quickly also. These rather unusual trades created a red flag and prompted investigations by the SEC, FBI, and U.S. Attorney General’s Office. Pete Bacanovic fabricated the story that Stewart had instructed him to sell stocks that had dropped below $60 dollars. They stuck to their stories to the bitter end.
The Martha Stewart case reveals the unethical behavior that sometimes exists amongst the social elite. The average every day investor doesn’t always have access to the same
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This law against inside trading formalized the ethical expectation of a fair stock exchange where investors have equal access to information and as a result any loss or gain is not because of manipulation. Waskal and subsequent Stewart were guilty of a white collar crime because her economic offense was done with deception. In addition Merrill Lynch employees, Faneuil and Bacanovic, violated their code of conduct which states that the company protects the confidentiality and security of client information, which includes