Incriminating Documents


Never put it in writing is standard advice for shady operators. Yet sometimes it's the combination of what's written, and what's not, that trips people up. Martha Stewart, embroiled in an insider-trading investigation that has already seen her CEO buddy of ImClone Systems Inc. cuffed, stuffed, and released on bail, has a story and she's sticking to it. A stop-loss order at $60, not insider information, triggered the sale of her ImClone stock a day before word of an adverse FDA ruling caused it to collapse. To back it up, her broker, who may face charges of insider trading, has produced a piece of paper with "$60" on it, but no date. Investigators note that this note falls way short of being exculpatory, especially considering other, harder evidence. The broker's assistant says that there was never such an order, for example, and adds that his boss told him to lie and say there was.

Speaking of undated paper, investigators are looking into whether that giant fraud factory known as Enron illegally manipulated the California electricity market in 2000 and 2001. Here, too, written evidence is playing a role. In a memo dated December 6, 2000, outside attorneys for Enron prepared a memo that explained the firm's strategies of arbitrage and some outright fraud that were making it money in California. "In order to short the ancillary services," the lawyers wrote of an Enron strategy called "Get Shorty," "it's necessary to submit false information that purport to identify the sources of the ancillary services." In other words, traders have to lie to regulators. Sensing the danger that such a frank memo might find its way into the wrong hands, Enron enlisted lawyers from two other firms to follow up with another memo, this one undated, that is an obvious effort at spinning the unspinnable.

There's also the role documents played in the unfortunate fate of one-time accounting giant Arthur Andersen. At the outset of the trial, legal eagles thought that the firm's last-minute shredding operation that would be the firm's downfall. The firm's fate, however, ended up turning on the removal on an attorney's name from a memo discussing Enron.

With securities markets approaching 9/11 lows, the consensus is that such shenanigans have caused investors to lose trust in American business writ large, if not Martha Stewart's recipes writ small. That may or may not be the case. But businessmen, and women, can find solace in knowing that the American public's confidence in them has not been shaken too badly by recent events.

According to a recent Washington Post-ABC News poll, the same proportion of Americans expressed a "great deal" or "quite a lot of confidence" in big business in 2002 as in 1991.

The bad news? It's only 23 percent of the public.