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Congressman want to redecorate their hearing room with Martha Stewart | |||
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By DAVID MOON, Moon Capital Management Exactly 30 years after Gordon Liddy's "plumbers" broke into the Democratic National Committee headquarters in the Watergate Hotel, Washington sets its sights on another potential bombshell investigation. Congress wants to interview Martha Stewart in connection with an insider trading investigation. Ms. Stewart, a former stockbroker, gave up prospectii and cold calls in favor of becoming America's diva of domesticity; she made a fortune being able to make a wedding dress and church decorations out of a 6 inch piece of PVC pipe. Her empire includes three magazines, a cable television show, home products and a mail order business. (No word yet on a possible 'prison collection.') Along the way from Wall Street to Main Street and back to Wall Street (she took her company public in 1999), Ms. Stewart met all sorts of neat people. One was Dr. Samuel D. Waksal, the recently resigned founder and CEO of ImClone. It seems that various members of Dr. Waksal 's family sold shares of the company's stock just before announcing that ImClone's promising new cancer drug, Erbitux, had been rejected. When the company announced the news on December 28, 2001, the stock dropped 75 percent. It is generally not a good thing to tell your friends and family bad news (or good news, for that matter) about your public company before telling the rest of the shareholders. Dr. Waksal was arrested for insider trading on June 12 and is still sitting in jail. In addition to Waksal's family, however, his good friend Ms. Stewart also sold her 3,928 shares, just one day before the public announcement. (Dr. Waksal knew of the FDA's likely decision several weeks earlier.) Ms. Stewart explains that more than a month before her stock sale, she had given her broker instructions to sell the shares if they dropped below a certain price. The broker contradicts Ms. Stewart's recollection, remembering the instructions as much later - perhaps after Dr. Waksal learned of the impending bad news from the FDA. For Ms. Stewart, the wind does, indeed, blow hardest at the top of the flagpole. Why in the world would the House Energy and Commerce Committee question Martha Stewart about her stock transactions? Simple: the publicity. Requiring the high-profile Stewart to testify would generate significant television coverage for the House members, who would then use the opportunity to grandstand against the evils of corrupt businessmen. The networks would lead with the story. Did Ms. Stewart do something wrong? I have no idea. (Ms. Stewart did sell some of her ImClone holdings a year ago, well before the FDA ruling. She denies all wrongdoing.) But it doesn't smell too rosy for the flower goddess. But so what? We have laws and plenty of other agencies that clearly have responsibility and jurisdiction. If Ms. Stewart (or any other shareholders, for that matter) broke the law, send them to jail. But holding hearings on Martha Stewart's 3,928 shares of ImClone seems a bit trivial for the people's legislative branch of the world's only superpower. David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).
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