I saw something pretty funny today which made me wonder just how stupid Rosie O'Donnell is. She has been on T.V. defending Martha Stewart since the whole thing started and she was on T.V. again babbling about how Martha Stewart didn't do anything wrong. First off, the only way Rosie O'Donnell could say more stupid shit is if there was two of her. I think we need to consider the possibility that Rosie O'Donnell may not in fact be an authority on what constitutes securities fraud. In fact I propose that she doesn't realize what insider trading is, or that the Securities and Exchanges Commission has a hard enough time prosecuting these cases without a demented walrus arfing her misconceptions to the puzzled everyday person.
It is also possible that a lot of people don't clearly understand what insider trading is, or why it is wrong. What I know about insider trading I learned about it in my time in school but mostly from movies, so as best as I can remember it I will try to go through it. If I am wrong anywhere just blame it on weary teachers and Hollywood. Or instead better yet, watch Blame it on Rio. By the way, I am not claiming to be well informed about the stock market, nor am I claiming that I have ever seen Blame it on Rio. In fact, neither is true.
The price of a stock is what investors buying shares on the stock market are willing to pay for what they believe the stock is now or will be worth. In the case of Imclone it was a company working on bringing a cancer drug to market. So the company appeared to have a pretty bright future. If the drug worked and they got FDA approval then the drug would sell like a motherfucker since cancer is so unpopular. While the drug was still unapproved the price of the stock was based on what people felt could be a big payoff if it got FDA approval, maybe almost as big as lifesaving drugs like Viagra or Xanax.
So anyway, the stock price is up. Investors are waiting for the FDA to approve the drug. Then magically on Dec. 27. 2001, the day before the FDA publicly announced that it wouldn't approve the Imclone drug, Martha Stewart and her broker coincidentally dumped their stocks. Suspiciously Martha got a phone call from her stockbroker the same day both of them dumped their stock. I think Martha also allegedly contacted the CEO on the 27. And more hilariously the CEO of Imclone was found guilty of several counts of insider trading, since he himself got wind of the FDA non approval decision on the 26 of December and immediately sold his stock and called most of his family and told them to do the same.
Then on the 28 the FDA publicly stated they weren't going to approve the drug and Imclone stock took a bath. So the evidence that Martha Stewart committed insider trading is all circumstantial, but the only other explanation is a slightly preposterous coincidence. You see it looks very much like she was tipped off about the FDA decision and so she and her broker ditched their stock before it sank like a stone. So anyway, what is the crime?
The SEC considers insider trading to be any trade where someone within the company, working for the company such as lawyers or brokers, their friends and anyone within close distance of the officers of the company to be an insider. If they get tipped or tip someone else about non public information and make a trade they are guilty of insider trading.
The reason these trades are illegal is because if the government looks the other way when people can make trades with privileged information it will destroy overall investor confidence. It's dishonest, since you willfully misrepresent your stock as worth the market price despite your secret knowledge that it is in fact worth less or sometimes purchase stock that will be worth way more than it is. No one will invest in the stock market if they are afraid that they are gonna get screwed by someone else with inside information. Its a little like a horse race where most people bet on it honestly but the race is fixed and only the people who are in on the fix actually get paid. The stock market is an insane enough gamble for most people as it is, if insider trading isn't punished only idiots will invest. The fact that investor confidence is so important is shown by the fact that most governments have very serious laws against insider trading. The government knows if they don't prosecute it then their economy may curl up and die.
You see insider trading is a rip off like most other rip offs, but unlike all other rip off's which the government doesn't give a shit about this one is very important to them because so much is at stake. And it makes sense, since these kind of scams can result in the swindling of millions or billions, rather than $1500 on a bunk Corolla.
So as it happens Martha Stewart did do something wrong, in fact she committed several major federal felonies. So before you feel sorry for her remember those things are crimes and she willingly broke the law. What's funny is that the money she made on the trade was total chump change, this trial and the time in jail will make that $45,000 seem like a joke.
So stupid Rosie O'Donnell shooting her tusks off about how the Martha Stewart trial is just a witchhunt is publicly undermining the laws and regulations that are the basis of a fair stock market. Granted Rosie barely knows what she's saying, she isn't well equipped to grasp the complex lights, sounds and smells that transpire on land outside of her marine habitat. But what she said actually amounts to saying its wrong to prosecute rich people for breaking the law to screw everyone else. Fortunately it hardly matters since I don't think the SEC is going to change their mind based on Rosie O'Donnell's opinion. But if they do, may blood rain from the sky because if Rosie O'Donnell is in charge its all over.
You probably recall that Martha Stewart was never even charged with securities fraud, which was a decision by the prosecution that some people wondered about. You most likely have already heard that she was charged and convicted of obstructing the SEC investigation into her inexplicably mysterious brainwave to dump the stock on the 27. It is seems pretty obvious why, but she told several lies about her trade to the investigators, most people suspect to cover her tracks. And so it was those lies she was eventually convicted of. It was strange since securities fraud carries way heftier fines and jail time than just lying about it, so why didn't they try to pin the whole thing on her? The prosecution might have thought they could more easily prove she lied about what she did than prove that she actually did it. And I guess they did prove it.
So what's my point? Rosie O'Donnell is so dumb it hurts, and Martha did actually do something wrong. But don't worry, I think she'll find a way to survive this ordeal, she'll probably be okay.