|Man Without Qualities|
Tuesday, July 20, 2004
The Man Without Qualities generally views the case against Martha Stewart as unwarranted, unnecessary and weak - far too weak to have supported her conviction. Setting aside the jury verdict is another thing entirely. I am suggesting here that a reasonably jury should not have convicted her, not that the jury's decision was reversible and wrong as a matter of law. So Ms. Stewart may be stuck, and that's probably not a "good thing" for anyone - including the American economy and society. This Wall Street Journal op-ed by George Melloan does a fine job of summarizing the excesses of the Stewart prosecution and putting the whole mess in a larger, wealth-destroying, context.
But it is also worth asking, and not rhetorically: Why Martha Stewart? That is, why did the Justice Department choose to go after this woman so viciously when so many other more serious, high-profile cases against celebrities end much more modestly? (Remember Mr. Gutfreund? He who manipulated much of the entire United States Treasury securities market? He who received a slap on the wrist compared to Ms. Stewart?) This is after all a woman whose life is, whatever her personal faults, an exemplary American success story in many ways. Why her for less than $50K?
Since Ms. Stewart has just been sentenced, and is therefore much in the news, I re-post a possible explanation that appeared here before:
The case against Ms. Stewart is, to my eye, emerging as so weak that again one must ask the question: Why is the Justice Department prosecuting Martha Stewart?I do not mean that question as a rhetorical device or one with an obvious answer ("They shouldn't."). No. I suspect there is more here. Namely, I suspect that the SEC and the Justice Department are aware of many other incidents in which Ms. Stewart is strongly suspected to have committed federal securities crimes - but the authorities can't prove those crimes, either. I suspect this because it is more than passing strange that a brilliant, successful, politically-connected businesswoman such as Ms. Stewart - who is so admirable in so many ways, despite the carpings of her rather obviously envious detractors - should be the focus of such strenuous enforcement efforts for her first offense, especially where that offense netted her so little money and civil and business penalties (loss of her NYSE seat, fall of her own company's stock price, high civil fines, bad publicity, etc) have already been so serious. What's going on?
A similar question was raised by the prosecution and conviction of Wynona Ryder for shoplifting at Saks Fifth Avenue in Beverly Hills. Wouldn't it have been enough for the police to confront her and warn her and for Saks to have made her pay trans-full-retail prices for the stolen merchandise - maybe obtain her contribution of a largish sum to some charity and her agreement to do some community service? All without actually prosecuting or arresting her?
Well, yes - for a first offender. Say what one will about the need to make examples of the successful, the fact is that if the Beverly Hills incident had been her first offense Ms. Ryder probably would not have been prosecuted. Neither Saks nor the district attorney would have wanted that.
But it likely wasn't Ms. Ryder's first offense: Transcripts made public after the trial disclosed that Ryder was suspected of shoplifting from two other high-end department stores in the past, but no charges were filed. Prosecutors were not allowed to present those allegations during the trial. Yes, prosecutors were not allowed to present those allegations during the trial - but those earlier incidents almost certainly affected the exercise of discretion on the part of both the prosecutors and Saks to press forward with charges against Ms. Ryder.
Similarly, my guess is that Ms. Stewart has long inhabited that peculiar Park Avenue demi-monde in which insider stock tips are traded at parties like the names of new hot boutiques. It would be interesting to see the SEC's and DOJ's files on Ms. Stewart. How many past incidents have terminated with a personal belief on the investigator's part that Ms. Stewart broke the law, but with no action other than a memo to files to "watch" her in the future? If Ms. Stewart has such files, it would be a rare member of Congress who would act vigorously on her behalf. In any event, the "watching" has now ended in legal action.
I am not convinced that the above argument completely explains the apparent excesses of the SEC and the Justice Department - even assuming the speculation on which the argument is based is correct. But the argument does help make what seems to be a completely bizarre set of official decisions make at least some, partial sense.
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