Martha Stewart and Insider Trading

Martha Stewart and the question of Insider Trading
Martha Stewart has been in the news for the past several months because of allegations that she is guilty of insider trading. Stewart sold about 3,000 shares of ImClone stock days before the Food and Drug Administration rejected the application for ImClone’s cancer drug, Erbitux. What makes it even more suspicious is that Martha Stewart is a close friend of Sam Waksal, who was the CEO of ImClone during this scandal. Waksal has since been put in jail for insider trading.
Stewart claims that it is just luck that she happened to sell her shares just before the announcement was made public and that she had no prior information about it. She said that she had a prior agreement with her broker, Peter Bacanovic, to sell her shares if the stock dropped below a certain target price. However, Bacanovic’s assistant, Doug Faneuil, has told the Securities and Exchange Commission that no such agreement was ever made. If the...