As long as everybody loses money, nobody's hurt


As Rick Barton notes below, Judge Cedarbaum has thrown out the charge of securities fraud against Martha Stewart—the one charging that, by publicly denying that she was guilty of a crime, she was committing the new crime of falsely trying to keep her company's stock price high. From a Bloomberg report:

"The government has offered no evidence that Stewart evinced a concern for the price of MSLO stock at any time during the relevant period," Cedarbaum said. "I have concluded that no reasonable juror can find beyond a reasonable doubt that the defendant lied for the purpose of influencing the market for the securities of her company."

I have no problem with her honor's wisdom on this point, but something seems pretty ironic. The one really compelling argument I know for criminalizing "insider trading" is that you want to avoid situations where an officer of a company makes decisions that damage the company and its shareholders while selling off his own stock. (The other argument, that you shouldn't be allowed to benefit from having information other people don't have, seems like something Lenin would have thought up.) Here you have a situation where, on a tangential charge related to insider trading, Stewart was charged with making an effort to help the company and its shareholders. The judge states specifically here that she is innocent thanks to her indifference to her company's performance. That is, as long as the head of the company doesn't care how the stock's doing, she's not breaking the law. I may be missing some nuances here.