The Trial Of Martha Stewart: Insider Trading

Case Study: The Trial of Martha Stewart

1. I’m convinced that Martha Stewart did commit the crime of insider trading, on December 27, 2001. Looking at the events leading to her decision to liquidate her shares in ImClone, it is evident that she was in possession of material information that was not available to the public yet. The fact that her Financial Advisor, Mr. Bacanovic had instructed Faneuil to call Martha Stewart and let her know of the selling frenzy that was going on with the Waksal’s, which suggests that Peter Bacanovic was in possession of insider information about ImClone company, which he shared with Martha and advised her to sell her shares before the stock plummets proves that, Stewart was aware of upcoming changes effecting ImClone stock beforehand. Another incident that suggests Martha Stewart’s quilt is the fact that when Peter Bacanovic asked Faneuil to call Martha and break the news to her, Faneuil hesitated asking Peter whether or not it was permitted to share that sort of sensitive information, with another client. Merrill Lynch’s Privacy Policy prohibits the release of client information, except upon client’s
The telephone call that was made to Martha Stewart’s secretary, Ann Armstrong revealed that Faneuil left a message stating, “Peter Bacanovic thinks ImColone is going to start trading downward.” Peter, in possession of material information has tipped off Martha Stewart about the Waksal’s selling their shares in ImClone and as a result she