May 26, 2006
Martha Stewart and Enron
Posted by Lisa Fairfax

Ironically, yesterday was Martha Stewart’s deadline for responding to the SEC’s insider trading charges against her. Martha Stewart has chosen to fight the charges. The Enron verdict may have made her decision easier. Although it is risky to make comparisons to Enron, certainly Martha Stewart could have been heartened by the fact that the insider trading charges were the only ones on which Skilling was able to obtain a not guilty verdict. As Joan Heminway (at Tennessee College of Law) has pointed out, the insider trading charges against Martha Stewart are relatively novel and hence may be difficult to prove. Thus, if Enron jurors believed that there was not enough proof to demonstrate insider trading based on the the seemingly straightforward facts of Skilling’s trades, then jurors may be even more skeptical of the charges against Martha Stewart. Yet even using Enron as a benchmark, Martha Stewart’s decision is risky. Besides the obvious distinction that Martha Stewart’s charges are civil and not criminal, the Enron verdict appears to demontrates a desire by jurors to hold CEOs accountable. Martha Stewart has to wonder if the prison time she's served has quenched this desire or if the public believes she still has more accounting to do.

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