Debatable: Does Martha Stewart deserve a prison term?

By Dustin Block

Saturday, March 6, 2004 1:00 AM CST

Martha Stewart was convicted Friday on four charges related to insider stock trading. She could be sentenced to 20 years in prison her crimes. Is this a just penalty? Supporters of the home and style magnate, whose net worth dropped $85 million to $335 million following her conviction Friday, argue that the amount of money in question is insignificant. Stewart saved roughly $51,000 by acting on an inside tip from the head of ImClone, a struggling bio-tech firm. Compared to her net value, the $51,000 in question was equivalent to a can of soda for most people.

People in favor of a harsh sentence for Stewart argue, and a jury agreed, that she broke laws that are the foundation of trust in our capitalist system. The average investor can trust in the stock market because all investors - rich or poor - are held to the same standards. Any sense of favoritism based on wealth could undermine the public's faith in the market and shutoff investments needed to help companies prosper.

However, Stewart is a special case. Because she is so famous and successful, it's clear some people were simply looking forward to seeing a celebrity fall.

Stewart's case received an inordinate amount of attention for a simple case of insider trading, and likely drew a stronger effort from prosecutors with an interest in building their own fame at the expense of a well- known defendant.

But Stewart may be a victim of her own success. Known for being exceptional at everything she did, her public shortcoming was a punchline in waiting. Unlike Bill Gates and Microsoft, who the public overwhelmingly supported despite serious charges of manipulating an entire industry, Stewart is reviled by some for being too perfect. Few other people would draw the public scrutiny she received for a common, and relatively minor, offense.

The charges centered on why Stewart dumped her ImClone Systems stock just a day before it was announced that the Food and Drug Administration had rejected ImClone's application for approval of a cancer drug. The announcement sent ImClone's stock plummeting.

Few people, other than those connected with ImClone's top-ranking officers, were privy to information about the impending FDA decision. As a result, most shareholders in the company lost money with the announcement - a fate Stewart and a few

others avoided.

One such person, ImClone CEO Sam Waksal, was convicted of insider trading after he tried to unload share of his own company a day before the FDA's decision. He is serving seven years in prison for his crime.

In a prepared statement, Stewart vowed to appeal the decision. However, observers said Friday it would be surprising if she did not spend time in prison - though any sentence likely will be far less than the 20-year maxium she is facing.

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