The moment you get the call from the federal government that you are under investigation, your lawyer comes to you and says: “Say nothing to the press or anyone else. Preserve all records. Destroy nothing. Tamper with nothing. And make sure that you tell the whole truth, nothing but the truth, when the times comes.”
I know it. I’ve gotten the call. A couple of times, unfortunately. So have dozens of my friends and colleagues. We can all give the speech verbatim that our lawyers gave us. We know they mean it. We know that they are the only people in the world we can trust—more, even, than our bosses, our mothers, our fathers, our shrinks, our rabbis and priests. Our only hope is that we are going to get through the investigation in one piece, perhaps even with our reputations and dignity intact.
Martha Stewart, I’m sure, got the same speech. Unfortunately, she seems to have ignored it. Worse, she apparently proceeded to do the exact opposite, concocting a stupid story about a stop-loss order that triggered her sale of ImClone stock, and then telling a bunch of people about it, all of whom have no protection from prying prosecutors because there is no “public-relations person–client” privilege, or “junior-assistant person–client” privilege. Martha Stewart treated her lawyers as underlings and her underlings as lawyers!
And for that, I predict, Martha Stewart will be convicted of obstruction of justice—a much more serious crime than insider trading in the eyes of the prosecutors—and she will go to prison. (Martha will get less than Sam Waksal, which is right because that guy was a world-class insider trader, but she wouldn’t be facing possible jail time at all if she had just stopped being such a boss!)
I know that seems almost impossible to believe. I know that many people think that the public-relations campaign that Martha has now launched will stop whatever she couldn’t stop criminally.
That’s nonsense. Martha continues to make every wrong move possible. It is so textbook that long after she is released from prison, you can bet that every single law school in the country will be studying her case.
You will hear a lot of the “no one is above the law” stuff from the prosecution, which we all know is untrue because people, particularly rich people, get away with crimes all the time. I am certain that some of the real bad guys in the big Enron, WorldCom, and Tyco scandals will get away with it. That’s part of the friction of the system: When you have high-paid lawyers and complicated financials, the prosecution can’t just walk in and convict you. Look at Walter Forbes. He is still playing golf five years after he presided over the then-biggest fraud in history at Cendant.
You will also hear that this whole matter involves a mere $45,000 and that Martha didn’t steal from her company and that she is being picked on unfairly and that she isn’t even charged with insider trading.
To which I say, “So what?” Prosecutors care about the process. They care about the integrity of the process. They care that the defendant plays by the rules. They are lied to all the time. It drives them bonkers. It makes them wild with anger. They would sooner look the other way at a million-dollar tough-to-prove insider-trading case, or even a $20 million insider-trading case, than pass up the chance to bust someone who has fabricated a story and lied to them.
“The brilliance of the Feds’ indictment of Stewart is that it doesn’t fool around with the insider-trading garbage. It is irrelevant.”
In fact, the brilliance of the Feds’ indictment of Stewart is that it doesn’t fool around with the insider-trading garbage. It is irrelevant. What matters is that Stewart had not one, not two, but multiple chances to tell the truth, or to say nothing—to take the Fifth—and instead stuck by the stop-loss concoction until it no longer fit the PR campaign.
What should Stewart have done? Quite simply, if she had said nothing at all, she would never have been charged with anything. Or she could have told the truth, which, it seems clear, is that she got a call from a broker to sell some stock because Waksal was selling, which is a gray area but not something that the Justice Department wants to use to redefine insider trading. We can’t suddenly make it illegal for a client of a firm to hear from her broker that another client is a large seller of common stock unless we want to outlaw the whole brokerage process, which routinely cites order flow as a reason to do a trade.
Nope, she had to make up some story about a stop-loss order! For heaven’s sake, as someone who has traded for 23 years, I can tell you that if there was a stop-loss order, it would have been in the computer at Merrill (Martha’s lawyers, of course, have argued that there was some sort of computer problem), and that would have been the end of it.
It wasn’t. End of story.
So justice, I’d say, was obstructed.
The Stewart team would tell you that this will be Martha Stewart’s word against some kid who was filling in for her regular broker. That’s not true either. They have a host of people and other evidence against her.
Ironically, there was still a chance here up to the last minute that she could go to the U.S. Attorney and say that she had no idea what a fool she had been about all of this stuff. That was one of the main reasons why the indictment took so long to bring.
Nope, now they are saying that the indictment took so long because the U.S. Attorney wasn’t sure of his case. Nonsense.
Now they’ve even blown that chance.
Which is why, a few months from now, a jury—which is certainly not of her peers (I have served on juries and know the truth to that, too)—will deliver a verdict that will shock everyone except her lawyers, who must have known the moment that Martha confused them with PR people that she was going down for the count.