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Uncovering the Martha Stewart Tax Scandal Insider

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 SCANDALMartha Seewart Tax ScandalStudent's Name:Institution's Affiliation:Date:

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MARTHA STEWART TAX SCANDAL2Martha Stewart ConvictionThe infamous Martha Stewart had a high-profile felony conviction following the insidertrading of ImClone Systems in 2001. As Stabile (2007) reported, ImClone was abiopharmaceutical company that embarked on the manufacturing of biological medicine in thearea of oncology. In 2001, the FDA failed to approve one of its drug development known asErbitux that caused a significant drop in ImClone's stock price (New York Times, 2003). Shortlybefore the announcement of the FDA's decision, numerous company's executives., includingMartha 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 severalcharges. 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 inthe company's stock price after Samuel Waksal was ripped that the government would deny thecompany'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 asattempting to sei] his own.Insider trading and taxevasionInitially, Martha Stewart was convicted of insider trading before being found guilty of taxevasion. According to Stabile (2007). insider trading involves trading a public company's stockwithout informing the public about the sale. In some countries, including the U.S, insider tradingis 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 wasaccused of failing to pay taxes on her New York home, which accrued to a sum of $220,000
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Business Management

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