In one of the year's more inspired journalistic hires, Slate has assigned former Merrill Lynch and CIBC internet financial analyst Henry Blodget to cover the Martha Stewart trial. You'll recall that Blodget had some problems of his own with regulatory pests, so two cheers to Slate for its increasing stance in favor of the free market and against the feds. (I'm still reeling from Michael Kinsley's citation of wage and price controls as R.M. Nixon's gravest offense against freedom a while back.) Blodget files an amusing mood piece today, and gives a quick sketch of the case's tangles:
The Save Martha! slogan—"If her stock sale was legit, you must acquit!"—gets at one of the tensions of the case. The prosecutors aren't alleging that the trade was illegitimate; they are saying, in effect, that whether it was legitimate or not is irrelevant. At issue is whether Martha Stewart should go to jail for allegedly lying, conspiring, etc., to cover up an action that, at the time, as alleged, wasn't a crime (selling a stock because she learned that the CEO of the company was trying to dump his own stock like a pot-smuggler about to be boarded by the Coast Guard). What complicates matters, of course, is that Stewart's subsequent actions—the temporary alteration of her phone log, etc.—suggest that, at least momentarily, she might have considered the trade a crime (or thought that others might consider it a crime). Meanwhile, in a parallel, ground-breaking civil case, the Securities and Exchange Commission is alleging that the trade was a crime, even though, according to legal experts, the type of information Stewart allegedly received—and she hasn't denied receiving it—hasn't been illegal to trade on in the past (the information was "market" information, not "inside" information, and although some kinds of market information are illegal to trade on, this kind hasn't been treated that way). If the SEC action is successful, it will extend the definition of insider trading to criminalize what Stewart allegedly did, but only after her trial on obstruction of justice charges is over.
In Reason's October cover story, Michael McMenamin gallantly came to Martha's defense, and provided a much more detailed look at the SEC's expanding criminalization of knowing things.