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Daniels Fund Ethics Initiative University of New Mexico http://danielsethics.mgt.unm.edu Martha Stewart’s Insider Trading Scandal INTRODUCTION Martha Stewart is one of the few business mavens who can still claim widespread popularity after a highly-publicized scandal. She is the founder and former CEO of Martha Stewart Living Omnimedia Inc., a company with interests in publishing, television, merchandising, electronic commerce, and related international partnerships. In the early 2000s, America’s most famous homemaker became the center of headlines, speculations, and eventually a federal investigation concerning her stock trading. Martha Stewart was accused of insider trading after she sold four thousand ImClone shares one day before that firm’s stock price plummeted. Although the charges of securities fraud were thrown out, Ms. Stewart was found guilty of four counts of obstruction of justice and lying to investigators. She was sentenced to five months of prison, five months of house arrest, and two years of probation. After her release from prison, Martha Stewart involved herself in a variety of ventures, including magazines, a short-lived reality television show “The Apprentice: Martha Stewart,” “The Martha Stewart Show,” and branded items sold by flower shops, KB Homes, and Macy’s. Martha Stewart still controls much of Martha Stewart Living Omnimedia. Even though she was barred from acting as director of the company for five years, Stewart continues to control about 50 percent of Martha Stewart Living Omnimedia Inc. stock and about 90 percent of voting stock. While it often takes many years for businesspeople to regain trust after corporate misconduct, Martha Stewart remains a beloved household icon for thousands of loyal fans. EVOLUTION OF A MEDIA EMPIRE Martha Stewart’s lucrative career includes stockbroker, caterer, business owner, and home living expert. Born in 1941 as Martha Kostyra, Stewart developed a passion for cooking,...