March 05, 2004
You Got Jail!
Posted by Ellen at March 05, 2004 09:23 PM
NEW YORK - Martha Stewart was convicted Friday of obstructing justice and lying to the government about why she unloaded her ImClone stock just before the price plummeted — a verdict that could send her to prison and cripple the homemaking empire built around her vision of gracious living.
The charges carry up to 20 years in prison for both Stewart and Bacanovic. The judge could potentially sentence the pair to time in a halfway house or home confinement, but legal experts have said the term would probably be reduced to roughly a year in prison under federal guidelines. Each charge carries a maximum sentence of five years and a $250,000 fine.
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Thing is... I thought people were supposed to try to sell their stock when they knew the price was about to drop? Is that illegal now?
I think it has to do with having an inside friend who knows more than the public about the future welfare of the stock sharing that info with you. You're betting on more of a sure thing than more random predictions of the market. But that's just the gist I've picked up over time.
I'm not sure I trust the courts to decide whether information is illegal to act upon or not. Suppose I was a bartender at a bar CEO Waskal frequented, and a stockholder in ImClone (he managed to talk me into buying some one night over beers). Suppose the night before he got deep in his cups and shouted out to the whole bar that he was selling his stock and we'd better do the same. Would I be required by law to hold my stock and take a loss, for fear of being arrested for insider trading?
Technically, ANY means of predicting whether a stock will sink or sail can be considered "insider information" if it produces sufficiently accurate results to allow an investor to make money on the market. I remember one guy who made a killing on the market by buying and selling based on whether the company offices' parking lots were full or empty during business hours. Technically, it's insider information, as not everybody has the time or means to travel out to the offices of the companys they invest in.
What is considered "insider information" and what isn't?
Couple of points from my understanding. One - you only discuss these sorts of things at work. Since the stock market and insider information generally work on some odd-ass principle called 'guidance', any changes to that will cause the market for that stock to rise or fall (along with many other things, but this is what's relevant here. Basically, a company issues guidance on a quarterly or yearly basis. This guidance is the companies prediction on things like growth and earnings per share. If the market believes them, a certain amount of buying occurs - which is speculative in nature. Then, over the course of time, people look for press releases and the like to decide whether or not to hold onto the stock, buy the stock, etc. This part is easy, because it's what everyone is allowed to do. However, it becomes inside information as soon as what you know isn't available to the general public. Typically, this has to do with hearing about significant changes to the guidance. However, knowing about it isn't a problem. It's doing something about it that is. I may know what my company is going to do - but if that hasn't been released, I can't tell anyone I know about it.
Hope this helps.
And aside from that, I hope the judge is a dick and gives Martha 'Jailbird' Stewart the full sentence. In some high security lesbian-filled prison. And refuses to allow her to coordinate anything. Her uniform should be red and orange. Her cell puke green - and no wall should match.
Ron, I will try control my desire to hit you with a brick when I meet you in April. lol
But shouldn't smart speculators seek out as much information as possible before making their decisions? Considering the fact that futures investors can rack up such enormous debts for the slightest mistake that not only do they go bankrupt but they often bankrupt any companies affiliated with them, you would think that seeking out information beyond what is made publicly available would be encouraged, not condemned.
Seems to me the legal system is set up to ensure that federal bailouts on the order of Neil Bush's are inevitable, rather than discouraged.
Pat - I'll make sure I wear a padded helmet when I meet you.
Tat - Well, yes, they should get as much info as possible. However, I think that the statute comes into effect when it's a clear advantage that someone else couldn't get. Something like a phonecall from the CEO saying "We're screwed. Just lost 50% of our revenue." or something to that effect. If you get this info and then act on it, it's reasonable to assume that the public sector can't get the info, which means you have inside information and can't act on it. I say that because I hear info about what's going on in my company all of the time and I'm not supposed to act upon it (and in truth I don't because I'm not good enough to truly benefit from it). The other key point is here is the magnitude of the money made by the actions. If I, as a private person, made a thousand or two, I probably wouldn't be in trouble. However, if a speculator/large private investor got wind of something and then made a large enough move to disrupt the market, they're going to get it in the end.
Not sure on the Neil Bush thing, don't have any details on that - but yes, the gov't would rather bail people out (think Chrysler in the 80's) than let business run it's course (prevents monopolies, price-fixing, and other messy things).
ROTFLMAO!! I am only 5' tall so I probably won't present a danger to your head but you might consider knee pads. lol