Migjaid Taban
FIN4744
Sep 27th, 2015
Case #1 Martha Stewart (A) HBR
Did Martha Stewart engage in insider trading? If so by what theory?
Martha Stewart made a kind of securities fraud known as "insider trading" which means using insider information to make a stock transaction. It is trading in the stock market, making improper use of inside information. This information, most of the time, is held by directors of listed companies and those who provide investment services or counseling.
Stewart was convicted of conspiracy, perjury and obstruction of justice in 2001, and for using insider information to sell shares of the company ImClone Systems. This type of fraud damages the confidence of investors, it makes them perceive the lack of equality.
For this reason insider trading is prohibited, to protect market integrity. What about the other charges? How compelling are the criminal charges? In 2003, the SEC filed an accusation against Stewart, seeking to stop her from being engaged as a director and to limit her responsibilities as a civil company official. Stewart later gave up the Martha Stewart Living board, and the civil actions were stayed until Stewart’s criminal appeals process was finished. On July 16, 2004 the American celebrity and businesswoman craft industry, Martha Stewart was sentenced to five months in prison in Connecticut, not far from one of his mansions. Also, five months of home detention and two years on probation. She had to pay a fine of $30,000 too. The sentence was the minimum for the crime she was charged with, and unexpected, since the lawyers predicted that Stewart, would be forced to spend time behind bars 10-16 months. After leaving prison, all she had built began to crumble. Although her image was apparently intact despite her investments, she got a little bit affected by all these charges.
While the widely exposed and discussed trials of WorldCom's and Tyco's top executives were all over the media, one of the most interesting cases of securities fraud was happening without any public acknowledgement.
The jury convicted Stewart of making false statements to investigators during her February 4 interview, in violation of 18 U.S.C. 1001. The jury found Stewart guilty of making the following false statements, each of which was a specification in Count Three of the Indictment. Martha Stewart told the government investigators that she spoke to Peter Bacanovic on December 27 and instructed him to sell her ImClone shares after he informed her that ImClone was trading below $60 per share. Martha also stated that during the same telephone call, she and Peter Bacanovic discussed the performance of the stock of her own company, Martha Stewart Living Omnimedia ("MSLO"), and discussed K-Mart. She told investigators that she had decided to sell her ImClone shares at that time because she did not want to be bothered during her vacation.
Con man, Neal Caffrey was arrested for bond forgery and theft. He was sentenced to four years. Neal escaped prison months prior to his release in order to look for
Author, columnist, motivational speaker, television host, the personal finance guru of our time, Suze Orman worked her way from the bottom to the top with her financial knowledge to acquire her notable reputation today. “Orman started out as a financial adviser at Merrill Lynch, founding the successful Suze Orman Financial Group in 1987” (Orman 2014). Opening her own restaurant, Orman decided to invest her money with a broker at Merrill Lynch. Having zero knowledge about investing or any financial knowledge for that matter, she signed over her money to the broker which she trust that he would take the best route for her; Orman went broke within three months. “After losing all her money, Orman decided to become a broker and applied to the same Merrill Lynch office where she had lost her earlier investment” (Orman 2014). Trying to learn all she could, she eventually learned that her broker did not follow all the required policies; suing Merrill Lynch for inadequacy, Orman won the case. Ever since then she began studying and working hard for all her clients, doing all she could for them. Feeling that she could only reach out to so many people sitting in an office, Orman decided to start writing and publishing all her financial information and tips into books; such as The Courage to Be Rich, and The Laws of Money, The Lessons of Life. Once her books started flying off the shelves, Orman took her career a little further and became the host of her own television show, The Suze Orman Show. After receiving many awards and nominations, Orman still continues her weekly show to this day. Today she is now also of the columnists for Oprah’s magazine, O, and also a columnist for Yahoo Finance where she published the article, How to Take Control...
Rothstein) were indicted for conspiracy to defraud the public. All were acquitted for want of
Securities fraud, also known as investor fraud or investment fraud, is a deceiving way of manipulation in the stock markets, which persuades potential investors to purchase or sale due to false information, usually resulting in loss of investments. Securities fraud may also involve direct theft from those investing through embezzlement, the theft or misuse of funds placed in one’s trust (Google), or stock manipulation, which is a premeditated attempt to meddle with...
Jordan Belfort is famous for his crooked way of earning his millions as a stockbroker on Wall Street. Even Belfort started at the bottom, on his first day in Wall Street he was told he was “lower than pond scum”(Belfort 1). After writing a book about his happenings on Wall Street, we’ve seen the
Madura, Jeff. What Every Investor Needs to Know About Accounting Fraud. New York: McGraw-Hill, 2004. 1-156
But through her efforts to keep Jordan in check, he still managed to get caught for his crimes. This led to him being arrested and the Stratton Oakmont stock market was terminated. He was put under house arrest until his trial.
The stock market is an enigma to the average individual, as they cannot fathom or predict what the stock market will do. Due to this lack of knowledge, investors typically rely on a knowledgeable individual who inspires the confidence that they can turn their investments into a profit. This trust allowed Jordan Belfort to convince individuals to buy inferior stocks with the belief that they were going to make a fortune, all while he became wealthy instead. Jordan Belfort, the self-titled “Wolf of Wall Street”, at the helm of Stratton Oakmont was investigated and subsequently indicted with twenty-two counts of securities fraud, stock manipulation, money laundering and obstruction of justice. He went to prison at the age of 36 for defrauding an estimated 100 million dollars from investors through his company (Belfort, 2009). Analyzing his history of offences, how individual and environmental factors influenced his decision-making, and why he desisted from crime following his prison sentence can be explained through rational choice theory.
Bernie Madoff is one of the greatest conman in history. The Bernie Madoff scandal takes the gold as one of the top ponzi scheme in America. Madoff started the Wall Street firm, Bernard L. Madoff Investment Securities LLC, in 1960. Starting off as a penny stock trader with five thousand dollars, earned from his workings as a lifeguard and sprinkler installer, his firm began to grow with the support of his father-in-law, Saul Alpern, who helped by referred a group of close friends and family. Originally, his firm made markets by the National Quotations Bureau’s Pink Sheets. However, in order to compete with the bigger firms that were trading on the New York Stock Exchange floor, his firm started to use very intelligent computer software that help distributed their quotes in second’s rater then minutes. This software later became the NASDAQ that we know today. In December of 2008 Bernard Madoff confessed that he had embezzling billions of dollars from investors. It is estimated to have lasted nearly two decades, and stolen approximately $64.8 billion. On December 11, 2008 he was arreste...
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sexuality he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm (A&E Networks Television). Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.
This case study is not about Ms. Stewart direct participation with illegal insider trading as the media had steered the public to believe. To begin, Ms. Stewart received a phone call from Ann Armstrong, her assistant, stating that Peter Bacanovic, her stockbroker, “thinks ImClone is going to start trading down.” (Arnold, Beauchamp, Bowie, 2013, p. 390) Although Ms. Stewart was not able to get a hold of Peter, she talked to his assistance, Douglas Faneuil,
Insider trading has been a commonly discussed topic since Martha Stewart was accused, tried, convicted, and served a prison term for her involvement with the Inclon trading scandal. However, the definition of the term “insider trading” is not necessarily always connected with illegal activity. As a matter of fact, in some jurisdictions, “insider trading” is no crime. Traditionally, it has been an expected, and perfectly acceptable prerequisite for certain sorts of employment. ”(Insider Trading).
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex, he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm. Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.