Martha Stewart Case

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Martha Stewart owned shares of a company Called ImClone SystemIncorporated, which was founded in 1984, it is a biopharmaceutical companycommitted to advancing oncology care by developing a portfolio of targetedbiologic treatments designed to address the medical needs of patients with avariety of cancers. In 2001 ImClone received notification that a newprescription drug, in which the company poured extensive money intoresearch and development, would not receive approval by the Food and DrugAdministration. The CEO of ImClone, Sam Waskal, in an effort to avoidfinancial losses to his shares of ImClone, made a call to his stock broker todump his shares of the company stock. The broker, who also served as abroker for Martha Stewart, notified Stewart that the CEO was liquidating the company stock and that it would be in her financial interest to follow suit byselling off her own shares of the company, which totaled almost 4,000shares. The Securities and Exchange Commission noticed an unusual coincidencebetween the selling of mass amounts of shares by the CEO of ImClone andMartha Stewart and began an investigation to determine if Martha Stewartwas guilty of insider trading.Insider trading is defined by the SEC as “Illegal insider trading refersgenerally to buying or selling a security, in breach of a fiduciary duty or otherrelationship of trust and confidence, while in possession of material,nonpublic information about the security. However, in an interesting legaltechnicality, Martha Stewart did not necessarily breach a fiduciary duty tothe other investors, since she had no real obligation to inform otherinvestors, which would be the case if she were an officer with the company.It is therefore possible that if Martha Stewart had initially confessed to heractivities that she might not have been convicted of insider trading.However, that is not the course that Ms. Stewart

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