Judging from this news report at CNN, it appears that the judge in Martha Stewart’s trial is not going to allow her to present a defense.
“Among the limitations: Stewart’s lawyers can’t say she was being prosecuted for proclaiming her innocence in the case or for asserting her First Amendment right to free speech.
The defense also is barred from saying that the securities fraud charge Stewart faces is a novel application of securities laws, and from making statements that would tend to show the government’s motives in investigating or prosecuting Stewart were improper.
The defense also can’t say that the fact Stewart and former broker Peter Bacanovic aren’t facing criminal insider trading charges means the government doesn’t believe they committed such a crime.”
Why bother with a trial. Just throw her in the bog and if she floats then she’s a witch.
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Is there a simple, layman explaination as to why Martha’s case isn’t “insider trading?”
“The defense also can’t say that the fact Stewart and former broker Peter Bacanovic aren’t facing criminal insider trading charges means the government doesn’t believe they committed such a crime.”
How are her charges different than “criminal insider trading charges?”
Insider trading is limited to individuals who have a ‘fiduciary’ relationship with a given firm. Martha is a private citizen who did not hold any position within ImClone or its auditors, for example (I believe it may extend to family members; we have ‘restricted’ accounts for all employees and their immediate family, so this is probably the case).
So, technically, she was not an insider and can not be charged with insider trading. Which she wasn’t – they just made noises about it, she said she didn’t do it (which is correct in any legal sense, if the rule of law still applies in this country, whether or not she was informed by an insider), and They won’t let such insolence fly.
My understanding is as follows. I am no lawyer.
The law, as written in Section 10(b) of the 1934 Act, is limited in scope. According to the law insider trading only occurs when there is a fiduciary responsibility to the company and when the person with such fiduciary responsibility recieves personal benefit.
The SEC is given the task of formulating rules and regulations that are designed to enforce what was actually legislated. In this case the SEC has written a 1934 Act Rule which is much broader than the actual intent of the original legislation. The rule prohibits any trading or tipping based on non-public information regardless of fiduciary duty.
Thus the SEC has acted as a legislative body. So far the Supreme Court has upheld this breach of the constitutional authority of congress. Actually it is more complex than this with several seemly contradictory rulings in several different cases. Some favoring the law and some the rule.
I don’t find this the least bit surprising since the members of the Supreme Court are political appointees.
Under the law Marta is innocent. There is no proof of a payoff for the alleged tip. Under the rule she would only be guilty of insider trading if the could prove she recieved some non-public information regarding the company.
This all can get rather grey even in the case of the rule and not the law. What if her broker just told her that Sam Waksal was selling so perhaps she should? What if he only told her that he thought it was a good idea to sell today but they did not discuss why?
In any case they are not charging her with insider trading even by the broader standard of the SEC rule. They are charging her with obstruction of justice. It is beyond me how they can prove obstruction of justice without also proving she broke the SEC rule. Therefore, I cannot understand why they did not also bring a charge of violating the SEC rule on insider trading.
The most ridiculous charge they are making is that she mislead the shareholders of her own company by proclaiming her innocence of insider trading. They claim this is securities fraud.
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