This post is part of a feature in which we wonder whatever happened to some notorious financial felons. See all 17.
I sometimes get the impression that people think I'm joking when I say I love Martha Stewart. I get it; I don't look like I have much in common with Martha. My apartment is cluttered, my cleaning habits are slapdash at best, and my hair is generally unkempt. I have at least a week's worth of random garbage traveling with me in the Hyundai at all times -- and I often get the distinct impression that people from New England are looking down on me.
Despite our differences, Martha is a personal hero of mine. Flipping through her magazine, Martha Stewart Living, is not unlike paging through a National Geographic. It's a glossy, impeccably photographed glimpse into an exotic world that I can only hope one day to visit. If the July 2007 issue can be believed, Martha is the type of woman who, on a whim, jaunts out to East Hampton for a weekend of kayaking and antiquing. In between horseback rides and hikes, she just might whip up some pasta with salted pressed fish roe, or perhaps a nice avocado gelato. Can you imagine?
So you can appreciate my shock upon discovering that Martha, this creature of uncommon refinement, might also be a common white-collar criminal. On December 27, 2001, Stewart dumped 3,928 shares of ImClone Systems (NASDAQ: IMCL) through her broker, Peter Bacanovic of Merrill Lynch. Martha -- the CEO herself of an eponymous multi-million-dollar media empire, Martha Stewart Living Omnimedia (NYSE: MSO) -- raked in about $288,000 from the sale. The next day, after the market closed, ImClone announced that its cancer drug Erbitux had been rejected by the Food & Drug Administration. It was an explosive bit of news that sent ImClone shares plunging.
ImClone's chief executive, Dr. Samuel Waksal, also sold a chunk of ImClone stock on December 27. Oddly enough, Waksal happened to be a close friend of Ms. Martha Stewart, and he was also a brokerage client of Bacanovic's. But the weird coincidences don't end there -- in the two days leading up to ImClone's damning announcement, about $2.9 million worth of the company's shares were unloaded by five relatives of Dr. Waksal.
On June 12, 2002, Waksal was arrested on insider trading charges. The news sent MSO shares reeling, as investors began to wonder about the extent of Stewart's knowledge about ImClone and Erbitux. During an appearance on The Early Show shortly thereafter, Martha deflected the pressing questions of Jane Clayson by insisting, "I want to focus on my salad."
Indeed, it was this uppity attitude that would prove to be Martha's fatal flaw. The domestic diva was indicted in June 2003 on nine separate counts, including obstruction of justice and securities fraud. She immediately stepped down from her post as chairman and CEO of MSO, though she maintained a creative role with the company.
Her five-week jury trial started in January 2004, and much ink was spilled about the Hermes Birkin bag she carried with her into the courtroom. The New York Times observed that Martha's decision to tote the iconic purse -- which retails for $8,000 to $80,000, if you can stand the two- to six-year waiting list to buy one -- "cemented an image of her as a pampered fat cat seemingly willing to snatch money from Average Joe Stockholder."
In the end, Ms. Stewart was convicted on four charges and shipped off to a low-key women's prison in West Virginia. (The facility, dismissed by the press as "Camp Cupcake," previously had a more dubious claim to fame: Manson Family member Lynette "Squeaky" Fromme escaped from Alderson in 1987 to meet up with a reportedly ailing Charles.) In total, Martha served five months at FPC Alderson and another five on house arrest.
Through it all, she maintained her sense of entitlement; Stewart's house-arrest term was lengthened by three weeks after she went AWOL to drop in on a yoga class. While it's impossible to condone Martha's securities-related indiscretions, it's remarkably easy to like her for stickin' it to the Man in such Hamptons-worthy style.
Objectively, Stewart simply seems like another in a long, proud tradition of moody, controlling, and demanding media tycoons -- think Ted Turner, Rupert Murdoch, Sumner Redstone. The difference? Martha is her brand, and the prison kerfuffle helped to humanize her, for better or worse.
In fact, she seems to have learned a lesson from the ImClone PR nightmare. Today, her involvement with MSO remains limited to figurehead status, though she does continue to lend her unparalleled creative talents to the organization. Following an ill-fated Apprentice spin-off, her latest attempt to stay relevant is a self-deprecating show called Whatever, Martha!, which combines old episodes of Martha Stewart Living with allegedly witty commentary from her daughter, Alexis. I can't vouch for that personally, though; I'm not classy enough to get the Fine Living network.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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Chasing Value: Hasbro Earnings Makes My Point
Reader Comments (Page 1 of 1)
11-19-2008 @ 10:13AM
Badnicole said...
Martha was never convicted on the securities fraud ("insider trading") charges - only the charges involving obstruction of justice ("lying" to investigators). Biggest witch hunt (no pun intended, I actually like Martha) in the history of the federal goverment.
I wonder how much time Mark Cuban will get when he is convicted of insider trading. What an idiot! Probably not as much as Martha, since he's a man.
It is also ridiculous that Marc Rich was not on this list of famous financial felons, since he's the king of these people. He evaded $48 million in taxes and was convicted of 51 counts of tax fraud - biggest tax cheat in the history of the US - and Clinton pardoned him!
I'm sure he's not listed because Obama is about to make the lawyer who recommended to Clinton that he pardon him the next Attorney General. Typical liberal media "forgetting" to mention the ones with any connection to the Dems.
11-19-2008 @ 8:08PM
Leigh said...
Martha Stewart IS A HERO!! She was only sent to jail because she was a woman that made it BIG in a "Man's World" & it really aggravated them!!! Any MAN that did what she did wouldn't have gone to jail - they would have been "slapped on the wrist" and told not to do it again! Martha, you GO GIRL!!!!
11-24-2008 @ 11:56AM
Jane Palmer said...
Mary Stewart shouldn't even be on this list, let alone at the top of it. You people just can't get enough of trying to trash this woman. Your jealousy of her sticks out all over you. Get over it and leave the woman ALONE!
12-05-2008 @ 8:32AM
nick said...
Martha will get her's from her Obama boy when he leaves off, no anytime too soon. She thought she could do whatever she wanted, another person who let greed get in the way.
12-06-2008 @ 11:47AM
SAUL H SEGAN ESQ said...
This prosecutionof Martha Stewart was an absolute aberration in our criminal justice system.
Her sole crime was being a woman who was too successful for her chauvinicstic male prosecutorial enemies to bear. As far as her carrying an expensive bag, that is pure jealousy between haves and have-nots, earned with her own money and resources. She has brought so much joy and value to American lives, and beauty to their homes, and created many jobs for many Americans. Politivians and law enforcement personnel play in the lealousies of the American people which is a cruel and self-defeating thing to do. When you are jealouos of peolpe, you block your own prosperity. Remember also, when you want to put icons out of business, you are also hurting the many hard-working individuals who work for them, who are only trying to give THEIR families a better life.
It is time to change our collective attitudes toward the successful. We laud America for making the "American Dream " possible. Then when they achieve what we have proclaimed they have the opportunity and right to create, we advocate taking it away from them!
Benevolence, love an sharing should cross ALL economic lines.
Hopefully, our n ew administration will consider these factors in tis intended intitiatives.
1-03-2009 @ 12:36PM
AREYALLSTILLPREDJDICE said...
HOW IS IT THAT LAW MAKERS SAME LAW BREAKERS .NOT CANCELING THEM SELVES OUT. FELON'S ARE STILL HUMAN BEINGS HOW CAN YOU PUNISH SOME AND NOT GIVE A CHANCE TO BE FORGIVEN . THE PEOPLE WHO PASSED THIS LAW MUST OF WANTED TO EXECUTE FELONS BECAUSE THAT IS THE OUT COME .THING IS THEIR STILL WALKING AROUND WITH NO WHERE TO GO AND NO MEANS OF SURVIVAL.WHICH WOULD MAKE THE GOVERMENT THEIR SLAVE OWNERS. I HOPE TO GOD THE SAME WOULD HAPPEN WITH THESE LAW MAKER LET'S START PRAYING THEIR WHOLE LIFE NO , ANYONE WOULD FORGIVE THEM A TASTE OF THEIR OWN MEDICINE PEOPLE PRAY AND I DO MEAN PRAY THEY NEED TO FEEL WHAT IT IS LIKE . REFER TO YOUR BIBLES EVERY FIRST OF THE MONTH SOON AS YOU RISE IN THE MORNING .