Uncovering the Martha Stewart Tax Scandal Insider

Name: Uncovering the Martha Stewart Tax Scandal Insider
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Author: Mason Bennett

Summary of Martha Stewart's insider trading and tax evasion scandal involving ImClone stock in 2001. She was convicted of conspiracy, obstruction, lying, and failing to pay \$220K in taxes on her NY home.

Mason Bennett

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Running head: MARTHA STEWART TAX SCANDAL
Martha Seewart Tax Scandal
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MARTHA STEWART TAX SCANDAL 2
Martha Stewart Conviction
The infamous Martha Stewart had a high-profile felony conviction following the insider
trading of ImClone Systems in 2001. As Stabile (2007) reported, ImClone was a
biopharmaceutical company that embarked on the manufacturing of biological medicine in the
area of oncology. In 2001, the FDA failed to approve one of its drug development known as
Erbitux that caused a significant drop in ImClone's stock price (New York Times, 2003). Shortly
before the announcement of the FDA's decision, numerous company's executives., including
Martha Stewart, had already sold their stock in a felony of insider trading. Several executives ,
including Samuel D. Waksal and Martha Stewart, were convicted and found guilty of several
charges. In addition to insider trading, Martha Stewart was found guilty of conspiracy,
obstruction of justice, lying, and tax evasion. The executives were aw7are of the probable fall in
the company's stock price after Samuel Waksal was ripped that the government would deny the
company's Erbitux application, which triggered their decision to sell their shares. Samuel D.
Waksal was arrested in 2002 for advising family and friends to sell their stocks as weld as
attempting to sei] his own.
Insider trading and tax evasion
Initially, Martha Stewart was convicted of insider trading before being found guilty of tax
evasion. According to Stabile (2007). insider trading involves trading a public company's stock
without informing the public about the sale. In some countries, including the U.S, insider trading
is illegal. On the other hand, as defined by Cheng (2011), tax evasion is an illegal activity,
whereby a person or entity deliberately fails or avoids paying the actual tax liability. Stewart was
accused of failing to pay taxes on her New York home, which accrued to a sum of $220,000

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Business Management

Uncovering the Martha Stewart Tax Scandal Insider

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