The Trial of Martha Stewart
On December 27, 2001, Douglas Faneuil, an assistant to stockbroker Peter Bacanovic at Merrill Lynch, took a call from Aliza Waksal, the daughter of Samuel Waksal, cofounder of ImClone Systems. She instructed Faneuil to sell her 39,472 shares and her father’s 79,797 shares. Faneuil was instructed to call Martha Stewart and she instructed Faneuil to sell her 3,928 shares.
ImClone was denied approval for a new drug, Erbitux which would cause the company’s stock to plummet. Merrill Lynch called the SEC to report suspicions of insider trading in ImClone. Stewart told the SEC that she instructed Bacanovic to sell her shares if the price fell below $60. Faneuil went to Merrill Lynch and confessed. He pled guilty to a misdemeanor charge for accepting money for not informing the investigators of illegal conduct. He was the prosecutor’s main defense. Stewart and Bacanovic were charged with conspiracy to conceal evidence of insider trading. Stewart was also charged with securities fraud. The trial began on January 27, 2004. On March 5, 2004, the jury came to a verdict. Stewart and Bacanovic were both guilty on four counts of lying and conspiring to lie to conceal they received insider information. Stewart was sentenced to five months imprisonment and five months home confinement. Bacanovic received a nearly identical sentence. On October 8, 2004, Stewart reported to a minimum-security prison in West Virginia.
This case demonstrates the two theories of business ethics. The theory of amorality states that a business should be conducted without reference to the full range of ethical standards. Society does not seem to agree with this theory in today’s economy. They tend to agree with the fact that business actions are judged by the ethical standards in society, the theory of moral unity (Steiner). The argument for this case is whether or not Martha Stewart acted in a morally ethical behavior when she received unpublished...