Alan Reynolds

After spending a year trying to decide what Martha Stewart was guilty of, the Department of Justice finally concluded -- as U.S. Attorney James Coney proudly announced -- that "this criminal case is about lying."

That's odd. A year ago, it was about insider trading. Specifically, "sources close to a Congressional investigation" planted a story in The New York Times on June 7, 2002 strongly implying that Martha Stewart had sold 39 shares of ImClone on Dec. 27, 2001 on a tip from the company's CEO Sam Waksal. That story was not written by Jayson Blair, but it might as well have been. The congressional leak about guilt-by-association with Waksal was just a vicious political smear campaign, but it kicked the stock of Martha Stewart Living Omnimedia down from $19 to $11 in a couple of weeks.

Believe it or not, the government now charges Stewart with "securities fraud" during that same period because she supposedly tried in vain to prop up her own stock by denying that she was guilty of the crime then charged -- insider trading. Yet the government now admits she was never guilty of that crime. Instead, she supposedly "obstructed justice" (her own threatened prosecution for a nonexistent crime) and made "false and misleading statements" about her reasons for making a perfectly legal sale of ImClone shares.

Any jury of passably sane people would laugh this out of court. It was the "sources close to a congressional investigation" that defrauded MSO investors a year ago. That political persecution was aided and abetted by the tabloid press, notably The New York Times.

The SEC recycled this government trash and came up with a civil charge of sorts. Yet the SEC's complaint effectively refutes both its own charges and those of the government. The SEC says, "Stewart asked Faneuil for the current market price of ImClone shares and was given a quote of approximately $58 a share. Stewart then instructed Faneuil to sell." That is exactly why Stewart said she sold ImClone that day -- the price was falling fast. Faneuil now claims he told her that the Waksal family was selling, but not why (Waksal did not say). But the SEC refutes Faneuil's new story, too, by saying, "Stewart then immediately called Waksal (after selling her ImClone shares), and left the following message: "Martha Stewart (called). Something is going on with ImClone and she wants to know what." The fact that she had to ask that question proves Martha Stewart did not know what was going on with ImClone after talking to Faneuil and selling her shares. End of story. Case closed.

Alan Reynolds

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