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Why Indict Martha Stewart and Not Ken Lay?


Shortly after Martha Stewart’s indictment for obstruction of justice, perjury and securities fraud, the questions started: “Is she being unfairly singled out for a common crime? Is she the victim of a male-wing conspiracy? Can you really build a home entertainment center out of Popsicle sticks and a bottle of Elmer’s Glue?” Well, after reading the criminal indictment, I have to say that the answer to the first two questions seems to be “Yes.”

According to the federal government, Martha Stewart sold shares of a biotech company, ImClone, after receiving a tip from her broker’s assistant that the company’s CEO was selling all of his shares. Even if these allegations are true, it only proves one thing – I need a new stockbroker.

I can only dream about having such a helpful stockbroker. I can’t even get my broker to return my calls; nevertheless tip me off about bad news before it happens. When Stewart’s broker finally gets out of jail, he will have at least one client – me.

Nevertheless, if these allegations are true, then Stewart is guilty of insider trading. As a general rule, the crime of insider trading occurs when someone buys or sells shares of a company based on non-public (or inside) information.

So why wasn’t Stewart charged with this more serious crime of insider trading? I suspect the reason is because federal prosecutors aren’t convinced that they can prove her guilt “beyond a reasonable doubt.”

Instead, the SEC filed a civil complaint against Stewart for insider trading. The standard of proof in a civil action is not beyond a reasonable doubt but rather by a preponderance of the evidence. Or in other words, in the civil case, the SEC will only have to prove that Stewart likely committed insider trading.

Nevertheless, despite the fact that a civil verdict against Stewart could impose hefty fines, federal prosecutors feel they need to make more of a statement in this case. Therefore, they are charging Stewart with covering up the crime that she hasn’t been formally accused of committing.

According to the indictment, Stewart lied to investigators, falsified records and conspired with her stockbroker to concoct a bogus story. In other words, she is accused of acting like a normal human being. The most human thing in the world is to cover up our wrong doings. In fact, I think it was Ben Franklin who said, “If at first you’re not believed, lie, lie again.” Or maybe it was Bill Clinton.

And although I can’t condone Stewart’s actions, I’m not sure that they should be treated as separate crimes. For instance, let’s take the allegation that she lied to the FBI. Of course, she lied to the FBI. What sane person admits to the FBI that they’ve committed a crime? Yet, lying to investigators isn’t usually considered a separate crime. For instance, O.J. Simpson wasn’t charged with a separate count of obstruction for coming up with that ridiculous “I was in the backyard chipping golf balls in the dark” alibi.

Second, Stewart is accused of deleting phone records to prevent the FBI from learning the truth. Once again, this is pretty common. For instance, bank robbers often dump the getaway car. However, we don’t charge them with obstruction of justice for doing so. We understand that they are supposed to dump the getaway car – it’s one of the rules.

Likewise, Stewart was simply playing by the rules. The government’s job is to capture criminals and the criminal’s job is to avoid capture. However, in this case, Stewart is being charged with the crime of not helping the government convict her. This seems strange even by John Ashcroft standards.

Now, please don’t misunderstand me. I’m not condoning insider trading. However, the government can’t seem to prove its criminal insider trading case. Therefore, it has fallen back on obstruction, perjury and securities fraud as a way to get a conviction of some kind.

But why? Is Martha Stewart a dangerous person that we must somehow get off the streets? Sure, Stewart is annoying, smug and greedy but so are most of our children. Yet, we don’t usually indict them (although perhaps we should).

The simple truth about this case is that there are lies, damn lies and obstruction of justice. Of the three, obstruction of justice is by far the most understandable. Therefore, instead of spending countless hours trying Martha Stewart, perhaps federal prosecutors could better spend that time pursuing real criminals on Wall Street like the people behind Enron, Adelphia and my stockbroker.

SEAN CARTER is a lawyer, comedian, public speaker and the author of If It Does Not Fit, Must You Acquit? Your Humorous Guide to the Law. He can be reached at


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