...Case Study: The Trial of Martha Stewart The United States of America is one of the few western countries which has no clear definitions for “insider”, “insider information”, and “insider trading” in its law system. Therefore, people are sending to prisons for a crime that has not defined yet. It is part of a due process that people have notice of what they are doing is wrong. Martha Stewart was sent to prison, because she sold her ImClone shares as a result of receiving tip from her broker on December 27, 2001. Bacanovic, Stewart’s broker, had routine access to the material, non-public information inside of ImClone which made him an insider. The argument here is whether Martha Stewart is an insider or not? Is receiving a tip makes her an insider? The same way, Sam Waksal, the CEO of ImClone, tipped his family members, an investment advisor, and a physician to sell their shares. However, none of the tippees was convicted with the insider trading crime, except for Martha Stewart. Martha Stewart was not holding any position in ImClone, nor had any routine access to the ImClone’s material, non-public information. Thus, how can she be possibly considered as an insider? It is very brutal to be convicted of a crime which has not been clearly defined in the law system, yet. The criticism here was that Martha Stewart was being used as a scapegoat, a victim. She could easily serve as an example of a high visibility celebrity who committed the insider trading crime. Also, it could be...
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...Aretha Jackson, president of a private investment firm received a call from a client asking for her advice whether to invest in Martha Stewart Living Omnimedia (MSLO). Jackson emailed Kate Prescott, director of Research, and asked her to prepared reports for her which will help Jackson assess the risks of investing in MSLO. Prescott delivered three reports to Jackson: one on the MSLO business model, one concerning the company’s core competitors, and one detailing consumer attitudes and behaviors (Herman, 2002). These three reports provided Jackson a complete overview on MSLO and it’s up to her to decide whether it’s favorable to invest in MSLO or not. The MSLO business model report mentioned that on October 19, 1999, MSLO went public. At the close of business day, MSLO reached a market value of $1.73 billion and a stake for Stewart worth $1.21 billion. MSLO described itself as a branded and highly integrated content company dedicated to helping people improve the quality of living in and around the home. MSLO produced original how to information and related product in seven core content areas such as home, cooking and entertaining, gardening, craft, holidays, keeping, and weddings. According to 60 Minutes, Stewart sold “that most indefinable and ambiguous of all products.” MSLO keys areas of strengths were in publishing, television, merchandising, internet and ecommerce (Neal, 2007). The company’s core competitor report defined MSLO’s competition based upon major and...
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...Corporate Hero with Scandal: Lessons Learned from Martha Stewart’s Insider Trading Crisis Shuhui Sophy Cheng Assistant Professor Department of Communication Arts Chaoyang University of Technology 168 Jifeng E. Rd. Wufeng District Taichung 41349, Taiwan Abstract Martha Stewart places her name on her products. She becomes the face of her company and the voice of her brand. When her personal misconduct occurred, she made her company vulnerable and risky as well. This casestudy examines how Martha Stewart managed her corporate communication when her public image and reputation were tarnished on trial for alleged insider trading scandal. The trial not only led her to prison but also hurt her brand equity. The study shows that Stewart’s early response to her crisis demonstrated lack of situation awareness. In the beginning of her investigation, she kept her public persona intact, ignoring or downplaying her role in it. As a result, what Stewart called “a small personal matter” later became a full-blown crisis. If she had managed her communication in a more timely manner, the magnitude of her crisis might have been minimized. This article also provides detailed insights for organizations to learn from her crisis response strategies. Keywords: Organizational crisis, Crisis communication, Image restoration 1. Introduction The personalities of strong business leaders can help shape and enhance their corporate image. In some cases, the leaders become the virtual icon of the corporate...
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...Complete the case studies for this week. Review the case studies below in the textbook. Prepare a one-page report for each of the following case studies: * Case Study: Martha Stewart’s Lost Reputation, pg. 34 * Case Study: Texaco: The Ecuador Issue, pg. 41 * Case Study: Where Were the Accountants?, pg. 44 Ethics Case: Martha Stewart’s Lost Reputation In June 2002, Martha Stewart began to wrestle with allegations that she had improperly used inside information to sell a stock investment to an unsuspecting investing public. That was when her personal friend Sam Waksal was defending himself against Securities and Exchange Commission (SEC) allegations that he had tipped off his family members so they could sell their shares of ImClone Systems Inc. (ImClone) just before other investors learned that ImClone’s fortunes were about to take a dive. Observers presumed that Martha was also tipped off and, even though she proclaimed her innocence, the rumors would not go away. On TV daily as the reigning guru of homemaking, Martha is the multi-millionaire proprietor, president and driving force of Martha Stewart Living Omnimedia Inc. (MSO), of which, on March 18, 2002, she owned 30,713,475 (62.6 percent1) of the class A, and 30,619,375 (100 percent) of the class B shares. On December 27, 2001, Martha’s Class A and Class B shares were worth approximately $17 each, so on paper Martha’s MSO class A shares alone were worth over $500 million. Class B shares are convertible into...
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...Throughout the case study on Martha Stewart, evidence provided illustrates how public relations can alter the image of a national personality in both negative and positive lights. In particular, the case illustrates how Stewart’s initially poor public relations responses tarnished her image and, only after changing her tactics, did she actually work toward correcting the problem. Ultimately, the Martha Stewart case is pivotal in illustrating how the power of public relations, if used correctly, can revamp a person’s public portrait----even if formal charges of criminal activity exist. Martha Stewart, a “model student” and iconic legend of the kitchen, has been world renown for her success and outspokenness in the past; however, upon receiving allegations of insider trading, Stewart actually became a ‘silent diva’ by inevitably isolating herself from all media and society (Seitel, 17-18). Although this initial public relations response helped Martha avoid responding to the pressing questions from the media, I believe that her silence was counterintuitive to proving her innocence in the sense that her natural personality was “typically feisty” (18). Using logical thinking, most Americans accused of a crime that they were not responsible for would protest, appeal, and flat out become outraged----actions that an already “feisty” Stewart surely would have carried out had she truly believed in her innocence. By remaining silent and withdrawing from her daily life on talk...
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...International ETH 501 BUSINESS ETHICS MOD 1 CASE STUDY Dr. Cathy Anderson Introduction The case against Martha Stewart surrounded her sale of 3,928 shares in ImClone Systems Inc., and whether she lied to investigators and her company's investors about it. On Dec. 27, 2001, Stewart cashed out her ImClone stake at an average price of $58.43, collecting about $229,500. After the market closed the following day, the Food and Drug Administration announced its refusal to review ImClone's application for Erbitux, a promising cancer drug. The next trading day, Dec. 31, ImClone's shares opened at $45.39 per share. That difference in price would have cost Stewart about $51,200 if she sold first thing that morning. Had she acted responsibly? The obvious answer is no. But I defy anyone to ignore the possibility that they could lose a large some of money in a short time. Her actions after getting the news that she could lose thousands of dollars were a matter of self preservation. For those that states it’s all about the money; I ask, why then does a billionaire continue to buy low and sell high. It’s clear they’ve reached a point of saturation a few million dollars ago. For some it’s the thrill of the hunt not the kill that keeps them motivated; they’ve enough severed heads mounted within their mansions. Compared to the recent actions of others CEO’s Kenneth Lay of Enron and L. Dennis Kozlowski of Tyco, Martha Stewart told what amounted to a ‘little white lie’...
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...2002 Martha Stewart was tried for securities fraud and obstructing justice. Martha had used her awareness of inside information that dealt with a review being made by the FDA on an anti-colon cancer drug Erbitux created by a company called ImClone to which Martha owned stock in. There are many ethical dilemmas Martha Stewart ignored at the time she used the inside information for her own financial benefits, or in this case her protection. She ignored any morals to practice fair trade in the stock exchange and instead only protected her own interest in at the expense of the people who bought the stock of ImClone from her. Martha knew the stock value of ImClone was going to decrease after the FDA’s announcement and decided that she shouldn’t be the one to take a hit. Martha failed to contemplate how her actions would impact others included the stakeholders of her business. Martha didn’t conduct herself in ethical manner which resulted in her being accused of insider training; greatly affecting her own business, Martha Stewart Living Omnimedia Inc. (MSO) and the stakeholders of the business. At the time of the allegations, MSO stock went from being valued at $17 to $5.26 a decrease of a 70%. As well Martha had to resign as the CEO of her company because her reputation and judgment became tarnished after beings indicted and charged for fraud and obstruction. All of this occurred because Martha didn’t want to lose $45,673 from the drop in ImClone stock, but mostly because Martha failed...
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...on the organization as well as the individual. It will indicate the sentence imposed in regards to committing Business fraud. The (SEC) U.S. Securities and Exchange Commission reported that Martha Stewart did on 27 Dec 2001 receive private information from an employee at Merrill Lynch. This information was used to save her from taking a loss in the stock market. Based on this private information She sold her shares in the ImClone System. By selling all her shares she was able to save $45,673 dollars. It was reported that the day after she sold her stocks the stock market value for ImClone fell 16%. The back lash from this illegal action came to light in the following months. Stewarts reputation suffered. The media had a field day with the information that she had received unpublicized information from her broker at Merrill Lynch. There were several articles headlining this information i.e. Newsweek had a cover indicating “Martha’s Mess”. She went on CBS and was literally grilled by Jane Clayson anchor at that time. During this time she was serving on the New York Stock Exchange as one of the board of directors. As of October of 2002, She had held that position for only four month’s but was forced to resign due to the controversy (BBC,October 4, 2002). Stewarts actions were not only unethical but they were illegal. In June 2003, she was indicted on charges of obstruction of justice (lieing to federal agents), she received 9 counts one of which was securities...
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...Government Regulation Research Paper 1 Crystal Carrothers Introduction Government regulation is around us everywhere. The government needs to make sure that the public’s interests are maintained and preserved. Being an accounting student, I have heard and read about regulation in the accounting industry numerous times. There have been many major accounting scandals in history that have lead to many different kinds of government regulation. The government regulations in accounting are mostly enacted to protect investors. From 2000 to 2002 there was an abundant number of large corporate accounting frauds, which led to the Sarbanes-Oxley Act of 2002. Previous regulations were efficient to a certain extent, but scandals still happened and more regulation seemed to always be needed. Even though the new SOX regulation seems powerful and efficient, I believe that there will always be a need for additional regulation in order to prevent future scandals. Securities Acts of 1933 and 1934 Summary of Regulation The stock market crash of 1929 resulted in the Securities Act of 1933. This act required that before a company an offer or sell securities in a public offering, they must register the securities with the Securities and Exchange Commission (SEC). The registration statement is used to notify the SEC that a sale of securities is pending and that the information needs to be disclosed to prospective buyers. This statement includes information about the issuer and its business...
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...------------------------------------------------- Martha Stewart’s Lost Reputation Discussion of ethical issues 1. What was the basis of Martha Stewart’s reputation? According to how stock prices of MSO fluctuates during her law suit trials, stock prices and market shares formed the basis of her reputation. 2. Why did MSO’s stock price decline due to Martha Stewart’s loss of reputation? The public trusted MSO reputation especially in the area of stock prices, thus when Martha was accused of insider’s trading of stocks, it tarnished the very foundation of the trust the public has on MSO. Naturally, the public would worry of losses and thus sell their shares they have on MSO. 3. Who is Martha Stewart’s target market? The target market is mostly upper-class ladies who lavished on premium products/ 4. What qualities were associated with the Martha Stewart brand, before the controversy? Which of these were affected by the accusations of insider trading, and how? How would you find out for sure? Credibility, reliability and trustworthy were the qualities associated with the brand, in which all three qualities were affected by the accusation of insider trading, an illegal and unethical act which ultimately loses the trust of end users. These can be inferred from how stock prices and market shares of MSO fluctuates during the period of the law suit trials, where public begin dumping their shares of MSO during unfavourable situation to Martha and buying back shares when situation...
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...(Cole 5) Some feel no matter the crime, the rich and famous will find a way to settle out of court, pay off witnesses or just erase some or all charges against them. Celebrities get the best lawyers and the best chance at justice that money can buy”. (“Times”) There are many court cases that lead people to believe the justice system is unfair. Celebrities, in the eyes of the public, receive less time than the average American citizen for the same crime. Furthermore, celebrities also receive more publicity than the average American citizen. Why do celebrities receive more camera time and less punishment time? However, our judicial system claims that all men are equal in the court of law. For example, in the court case of Marcus Dixon, a high school football player at Pepperell High School in Floyd County, Georgia, the state Supreme Court sentenced Dixon to ten years in prison. He was a black athlete accused of sexually assaulting a 15-year-old white girl in a small Georgia town. In addition, many believe that the justice system is not equal because of the outcomes of celebrity court cases. Some may disagree with the fact that celebrities get special treatment in the courtroom, but their court cases seem to prove contrary. Celebrities in America are able to get any and everything that money can buy. Hence, wherever they go they get...
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... There are several cases involving members of society being prosecuted for their illegal activity of insider trading; while Congress has exempted their members from acting on the same type of information. This type of conduct has serious legal, ethical and moral considerations. This paper will address the definition of insider trading. The legal, ethical and moral considerations of insider trading will be outlined, through a snap shot of the legal precedence recently in the press involving congressional behavior. It will further look at cases that have made headlines in past years, to show the distinction of what can happen to the general public who participate in insider trading. During a recent article by Parloff (2011), he stated, “The problem arises with respect to market-moving information a congressman learns in the course of doing his legislative work.” This comment is at the heart of the issue involving insider trading and Congress. The people elect members to Congress to act in their best interest. When the people of society feel members of Congress have violated that trust under legal, ethical, or moral wrongdoing, the members of society make decisions based upon those standards set by Congress. Thus members of society participate in insider trading knowing it is legally wrong. Insider Trading Insider trading can be a severe crime, as the general public is held answerable to such activity. Yet, it is legal for members of Congress. Case law exists on prosecution...
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...Plagiarism Exercise Instructions Plagiarism is a common error that is made in colleges and universities whether intentional or not. Please download this assignment and insert your answers beneath each question, then save and submit your work as Plag._Ex_Your Name. Below, you will complete an assignment where you will be required to review an excerpt from a journal article written by Martha Snyder. After reading the excerpt and reviewing all of the materials in the Reading & Study folder, please complete the questions related. Do not neglect to include citations as needed. In order to provide some clarification, please see the definitions below: * Paraphrase: When you paraphrase something, it means that you are restating the facts in your own words, clarifying facts, or rewording. * Summary: A summary requires that you take a passage or excerpt and break it down into the most basic points. To use a common metaphor, you are trimming the fat. The reader should be left with only the major points. * Quotation: A quotation requires that you take a portion of the text and replicate it exactly. This can be anywhere from 3 words to an entire sentence. Part One: 30 Points For the assignment, write as though each answer is a portion of your Adult Learning Theory Paper. Everything should be in current APA format (where necessary). Please read the excerpt below and answer the questions. In an effort to better understand how adults learn, adult learning theories are...
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...4. Martha Stewart’s Lost Reputation Discussion of ethical issues 1. What was the basis of Martha Stewart’s reputation? 2. Why did MSO’s stock price decline due to Martha Stewart’s loss of reputation? 3. Who is Martha Stewart’s target market? 4. What qualities were associated with the Martha Stewart brand, before the controversy? Which of these were affected by the accusations of insider trading, and how? How would you find out for sure? 5. What level of sales and profits would MSO have reached if Martha’s reputation had not been harmed? Refer to SEC or MSO websites for information on financial trends. 6. What range would the stock price have been in at the end of 2002 based on your estimates? 7. Martha’s overall net worth was huge relative to her investment in ImClone. Assuming she did not have inside information, was there any way she could have avoided the appearance of having it? 8. How could Martha have handled this crisis better? 9. Why is insider trading considered harmful? Should insider trading be banned if it assists in moving a stock price to a new equilibrium quickly, so that non-insiders are trading at appropriate prices sooner? 10. If you wished to sell an investment in a company where one of your friends is an insider, or even a significant employee, should you call your friend to advise him you are about to sell? Why, or why not? 5. China’s Tainted Baby Milk Powder: Rumored Control of Online News Discussion of Ethical Issues 1. Given...
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...Financial Terms Jessica Williams FIN/370 August 12, 2013 Christine Helbling Financial Terms Finance- The study of how people and businesses evaluate investments and raise capital to fund them. Its role is to manage revenues and monetary transactions within the banking and investment fields. Efficient market- A market where pertinent information is available to all participants at the same time, and where prices respond to immediately available information. Using the stock market as an example, Martha Stewart, a successful entrepreneur and owner of Martha Stewart Omnimedia, served time in jail for tax fraud. Once the information was made public, the prices for her company shares plummeted. Primary market- a market in which new, as opposed to previously issued, securities are bought and sold for the first time. According to Titman, Keown, & Martin (Chapter 2), in this market, firms issue new securities to raise money that they can then use to help finance their businesses. The key feature of the primary market is that the firms selling securities actually receive the money raised (2011). Secondary market- Financial market where previously issued securities (such bonds, notes, shares) and financial instruments (such as bills of exchange and certificates of deposit) are bought and sold. An example of a secondary market’s role is the activity that takes place during the process of buying and selling stock within the New York Stock Exchange (NYSE). If...
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