It’s a good thing to be king-as a certain disgraced diva might tell us-but not always such a good thing to be queen.
Even Martha Stewart’s advocates found her conduct difficult to defend as she faced sentencing and, perhaps, the ruin of the company she has spent her life building. Yet the government brought no charge of illicit trading against her, and the court vacated the specious securities-fraud counts, despite suspicions that inside information had spurred her unloading of ImClone shares before their value plummeted. Prosecutors ultimately accused her of nothing but attempting to conceal the facts about those trades, in part by lying to federal investigators.
Perhaps that was enough to justify her conviction, reduced as those charges were after all the hype. Besides, the taste-marketing maven appears to have believed herself exempt from the rules and laws that govern ordinary people, which is why so many of them celebrated her conviction. The government warned that should Ms. Stewart not be held accountable for her offenses, her escape from punishment would encourage lawlessness.
Ms. Stewart’s partisans retort that she was a target of selective prosecution. From right-wing columnists to left-leaning law professors, the converging opinion held that she was brought to book more on account of her celebrity than her culpability. Defenders of the feminist Democrat spanned the spectrum from Rosie O’Donnell to William Safire. Not everyone in the Stewart camp feels she was chosen to make an example of a successful woman in a male corporate world, but many agree that she suffered by exclusion from an “old boys’ network” that historically has protected powerful corporate crooks.
The New York Sun’s conservative editorialists complained about “political pressure to have her arrested publicly, in handcuffs, to illustrate the Bush administration’s tough posture against white-collar crime.”
How ironic, if true. For although Ms. Stewart’s conservative defenders might quibble, the selectivity of her prosecution is perfectly illustrated by the case of George W. Bush, former director of Harken Energy Corp. Back in 1991, after press exposure of his sudden, secretive sale of Harken shares, the Securities and Exchange Commission looked into whether Mr. Bush engaged in illegal insider trading. At the time, he happened to be the President’s eldest son-and whatever else might be said about the Harken matter, it is clear that those in authority scarcely strained themselves to investigate him.
The Bush and Stewart matters are entirely different, of course.
Ms. Stewart was just an ImClone stockholder, with no special responsibility to the other stockholders. Mr. Bush was not only a Harken stockholder but a member of the company’s audit committee. Ms. Stewart’s awareness of impending regulatory trouble for ImClone was secondhand, including the news that company founder Sam Waksal was selling stock. Her stockbroker told her that ImClone’s price was falling.
Mr. Bush was well aware of his company’s approaching financial doom. He knew that the Harken management had created a phony profit of $10 million by unloading assets, at an inflated price, to a front company owned by company insiders. That scam artificially puffed Harken’s stock by concealing huge losses.
Ms. Stewart sold 3,928 ImClone shares, possibly saving herself about $45,000. Mr. Bush sold 212,140 Harken shares, which grossed $848,560, saving himself well over half of that amount. Ms. Stewart had no warning that her trade might be unlawful. Mr. Bush and the other Harken directors were warned against insider trading by the firm’s lawyers just before he dumped his holdings.
Ms. Stewart partially erased a telephone message from her broker, allegedly for conspiratorial reasons, and then restored it. Mr. Bush failed to report his inside trades of Harken stock to the Securities and Exchange Commission, as required by law, for eight months, then blamed the delay on the S.E.C., and finally said it was the fault of Harken’s lawyers. He and his attorneys neglected to mention that memo warning him and the other directors about insider trading until after the S.E.C. closed its investigation of him.
As a Clinton friend who donated hundreds of thousands of dollars to the Democratic Party, Ms. Stewart has few friends in power these days. As the son of the President, Mr. Bush faced regulators who were loyal not only to his father, but to him. The agency’s general counsel at the time was James Doty, a Bush friend who had handled the sale of the Texas Rangers baseball team for George W. Bush and his partners in 1989.
The greatest difference between them is that Ms. Stewart, a self-made success, will spend months-if not years-in prison, losing hundreds of millions of dollars and her reputation. Mr. Bush, whose business achievements were owed largely to others, suffered not even a paltry fine.
Now George W. Bush is President, promising a new era of corporate responsibility symbolized by Martha Stewart’s ruin. Such is justice in the age of irony.
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