Touro University International Essays (1331 words) - Economy

Touro University International ETH 501 Module 1, Case Assignment Dr. Steven J. Gold INTRODUCTION The purpose of this report is to research information about Martha Stewart and explain if, as a CEO, did Martha Stewart handle the indictment responsibly. By discussing these topics, I hope to offer some knowledge on Martha Stewart, her company and the indictment. I will conclude this report with a brief summary of the entire analysis, highlighting some of the most significant parts that the report contains. Martha Stewart Born Martha Kostyra, Martha Stewart as a child was a Straight "A" student. Martha Stewart won a partial scholarship to Barnard College in New York City and to help pay expenses she worked as a model. She began her college career studying chemistry, but later switched to art, European history and architectural history. After Martha's sophomore year she married Andrew Stewart after college she continued modeling and started doing television commercials. She quit modeling after her daughter was born and two years later started a career, as a stockbroker. She eventually left the stockbroker career and her and her husband moved to Westport, Connecticut were they renovated her famous house now seen in her television show. She eventually started a catering company and a retail store selling specialty foods and supplies for entertaining. Martha Stewart wrote articles for the New York Times and was an editor and columnist for the magazine House Beautiful. She also published the first of many lavishly illustrated books. She eventually started producing dinner- music, videotapes, CDs, television specials and dozens of books on food, weddings, Christmas, gardening and restoring old houses. Martha signed a contract with Kmart doing advertising and consulting, she became a contributing editor to Family Circle magazine, and started her own magazine, Martha Stewart Living, which she eventually turned into a half hour television show. Martha Stewart became a household name but in 2003 she would have charges brought against her and went to trial in 2004. Her charges included "Obstruction of Justice: Alleges that Stewart tried to hamper the SEC investigation into her stock sale by providing misleading information, Securities Fraud: Alleges that Stewart made false statements about her stock sale to deceive the investors in her company, Martha Stewart OmniMedia, Conspiracy: Alleges that Stewart and her broker Peter Bacanovic willingly worked together to obstruct justice and issue false statements, and False Statement: Alleges that Stewart lied when she said that she had an arrangement to sell her stock when it dipped below $60, and when she stated she did not know the Waksal family was selling their stock"(The Cheating Culture, 2006). THE CASE Martha Steward had this to say to her fans " Dear Friends: I am obviously distressed by the jury's verdict but I continue to take comfort in knowing that I have done nothing wrong and that I have the enduring support of my family and friends. I will appeal the verdict and continue to fight to clear my name. I believe in the fairness of the judicial system and remain confident that I will ultimately prevail." She was accused of engaging in illegal insider trading. Stewart sold stock in a biopharmaceutical company called ImClone Systems, Inc on December 27, 2001 after receiving nonpublic information from Peter Bacanovic her broker working at Merrill Lynch, Pierce, Fenner & Smith Incorporated. Martha Stewart's trade occurred just before the release of a decision from the Food and Drug Administration (FDA) about an important cancer drug "Erbitux" that was being developed by ImClone. On December 27, 2001, Peter Bacanovic learned that two of his other clients, ImClone CEO Samuel Waksal and his daughter Aliza Waksal, were selling of the ImClone stock they held at Merrill Lynch. In violation of Merrill Lynch policies governing the confidentiality of client transactions, Peter Bacanovic instructed his assistant, Douglas Faneuil, to tell Martha Stewart about the Waksals' action, which was not public information. Information that the Waksals' were selling would have been important to the reasonable investor because, among other things, those sell orders signaled insider doubt about the anticipated FDA decision, the prospects for Erbitux, and the future of ImClone. Martha Stewart placed an order to sell all 3,928 shares of her ImClone stock, which saved her $45,673. The Securities and Exchange Commission then filed charges. MARTHA'S ACTION As CEO of her company I believe Martha Stewart's conduct was unethical. It most closely identifies with an ethical egoist. She only thought about how her action would affect her and not the rest of her stockholders. During many interviews she explained that she was mostly sorry for how this