Encounters with Martha, Part I

Here, from Doug Faneuil’s testimony today, is the crux of the case the prosecution is trying to bring against Martha Stewart in the current “insider trading” case:

SCENE — Doug Faneuil’s office. Merrill Lynch. The phone ring.

Douglas Faneuil: “Hello?”

Martha Stewart: “Hi, this is Martha. What’s going on with Sam [Waksal, CEO of ImClone]?”’

Faneuil: “Peter [Bacanovic, Martha’s broker] thought you might like to act on the information that Sam is trying to sell all his shares.”

Stewart: “All of his shares?”’

Faneuil: “Yes.”

Stewart: “I want to sell all of my shares.”

Martha did precisely what she should have done. Having been told that ImClone’s CEO is selling all of his shares — and not being an insider in the legal sense — she immediately decided to sell all of her shares. Assuming Faneuil’s testimony is any sort of facsimile of what happened, and there is a good chance it is at least part of the truth, the SEC thinks Stewart should have hung onto her InClone position — despite knowing that Waksal wasn’t. That is absolutely unhinged.

Sure, she should have ‘fessed up immediately to having done the only sensible thing in the face of what she had been told. But falling on one’s own sword for illogical and indefensible reasons is, at best, a learned skill.