Alan Reynolds

Don't you feel much safer now, with Martha Stewart about to go to prison? She decided to go to prison first, and then appeal later. That makes good business sense, so her company stock went up. But this whole trial and error makes no sense at all, so justice went down.

In late April, economist Thomas Sowell wrote about the Stewart case, questioning (as economists do) the rationale for making insider trading a crime. Sowell is an extraordinarily perceptive scholar. Yet he, too -- like Martha Stewart's relatively uneducated jury -- totally misunderstood what crimes she was accused of. "Perjury should of course be a crime," wrote Sowell. "But insider trading is something else." Yet Martha Stewart was not charged with perjury or insider trading.

 Journalists never tired of misinforming us Martha Stewart was guilty of insider trading. On the evening of her verdict, a public radio show opened with David Brown saying, 'It's rare that a case involving insider trading attracts such attention.'" A year before, a New York Times editorial claimed Martha Stewart "was tipped by insiders that the Food and Drug Administration was not going to approve" ImClone's anti-cancer drug Erbitux. They might as well have said she was accused of murder -- that is no less false.

 If all these professionals imagined Stewart accused of insider trading, what was some ordinary juror to think? Chappelle Hartridge told reporters the jury felt Stewart's background as a stockbroker meant "she should have known her moves were illegal." What he could not possibly know was that her stock sale was not illegal. Judge Cederbaum prohibited Stewart's defense from even mentioning that her sale of ImClone stock was 100 percent legal. That is why she should win on appeal. But she has been riding a powerful railroad, and it's hard stop.

 You might hope the Stewart case would at least be understood by Andrew C. McCarthy, former chief federal prosecutor from the Southern District of New York (where the Stewart case was filed) and now a contributor to National Review Online. Sure, prosecutors are a self-protective club. But enough is enough.

Alan Reynolds

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