What the Martha Stewart Case Means to You

by Harry Browne

March 5, 2004      

The Martha Stewart guilty verdict is more than troubling. It is an outrage.

The very case itself typifies today's government an entity that is free to intrude in any area of your life, free to make up the rules as it goes along, free to allow prosecutors to make names for themselves in high-profile cases without facing any personal consequences, no matter what harm they do.

Let me make it clear that I don't know Martha Stewart, I've never seen her TV show, and I've never read any of her books or magazines. I don't know what kind of person she is, and I don't care. But I care deeply about the kind of country America has turned into one in which there is no firm rule of law and anyone can be prosecuted at any time for any kind of offense that the government wants to invent.

No Crime Was Committed

Before you try to tell me Martha Stewart was proven guilty, I must first ask, "Guilty of what?"

Whom has she harmed? What is she supposed to have done that warrants sending her to prison?

The entire case arose because the prosecutor claims that she sold her ImClone stock on an "inside" tip when her broker told her that the head of ImClone was selling his stock.

So what????

What if she did act on inside information?

Is that any more unfair than some investor having a bigger computer than you have? Or having enough money to subscribe to more investment tip sheets than you do? Or being smarter than you are?

Since when it is a crime in America to use your wits, your knowledge, your talents, and yes your contacts to make money?

Although everyone in the courtroom for the Stewart trial and everyone talking about it on television assumes that there is something evil about so-called insider trading, the truth is that it is a victimless crime.

There is no victim no one who was hurt by the actions of someone buying or selling on inside information. Maybe it seems obvious to you that an insider can't profit without someone else being hurt, but that simply isn't the case. When Martha Stewart was indicted last year, I explained why "insider trading" is a crime without a victim.

And since there's no victim, "insider trading" is really a crime against the state and only the state like using recreational drugs or doing business with someone in a way that pleases all participants but displeases some politician or bureaucratic idiot who has no idea what he's doing.

And speaking of not knowing what he's doing, juror Chappell Hartridge remarked proudly on television that the Stewart guilty verdict sends a message that the investment markets will be safer for the little investor. He said, "Maybe it's a victory for the little guys who lose money in the market because of these kinds of transactions."

He hasn't the faintest idea how the investment markets work (and neither, apparently, did anyone else in the courtroom), but he holds the life of Martha Stewart in his hands.

Is Lying a Crime?

The prosecution also charged Martha Stewart with lying to government investigators.

Again, so what????

Just imagine for a moment how you would feel if you discovered that the United States Government had suddenly decided to use millions of dollars of its resources to prosecute you for something.

Most likely, you'd be scared to death. Imagine: you're likely to be put in prison for several years, lose your life savings, be separated from your family, lose your career. Your whole life would crumble.

In this situation, barely able to keep your emotions in check, if you saw a chance to beat the rap by telling a lie or doctoring some evidence, you'd have a huge incentive to do so even if you were innocent.

Doing anything you can to get the investigators off your back is a perfectly natural act. But now it's a crime. And the prosecutor in the Martha Stewart case smugly tells the world that the guilty verdict "sends a message" that lying to government employees will get you prison time.

(I wish these guys would put their messages in bottles and drop them in the ocean. I'm tired of hearing them.)

Of course, when government employees lie to you, they get promotions.


Another charge was that of "conspiracy."

Conspiracy to do what?

Conspiracy to do what the other charges were.

The whole concept of conspiracy crimes makes no sense.

If you rob someone of $1,000, you're guilty of robbery. If you and I together rob that person of $1,000, we're both guilty of robbery but the victim is no worse off than if you had done the job by yourself.

But in today's Alice-in-Wonderland legal system, we are not just guilty of robbery, we're also guilty of conspiring to rob because we're so inept it took two of us to do the job. (This may sound like a Polock joke, but it's serious business.)

Three Charges

So Martha Stewart was indicted on three different meaningless concepts: (1) selling some stock because someone told her an insider was selling, (2) lying to investigators, and (3) conspiring with someone else to lie to investigators.

What Really Happened?

To defend herself, Martha Stewart claimed the stock was sold because of a previously entered stop-loss order an instruction to her broker to sell the stock whenever it fell to $60.

The general response to Stewart's claim was a collective horselaugh.

The jury decided that she wasn't telling the truth that she had lied when she told the government investigators about the stop-loss.

I have no idea whether Martha Stewart's claim is true. Neither do you, neither do the jurors, neither does the judge, and neither do the prosecutors. Which means, without any hard evidence that she lied, the jurors can't possibly say they know she's guilty "beyond a reasonable doubt."

Anyone can suspect that he knows what happened. But a lot of innocent people have gone to prison on such suspicions.

The whole case came down to the testimony of Douglas Faneuil, a broker's assistant who claims that his boss told him to call Martha Stewart and tell her the head of ImClone was selling, and she should sell, too.

Apparently lost in all this is the fact that Douglas Faneuil originally said there was a stop-loss order and neither Martha Stewart or Faneuil's boss, Peter Bacanovic, did anything wrong.

What caused him to change his story?

The government charged him with being a participant in this venal conspiracy.

Not surprisingly, Faneuil decided to change his story. And, again not surprisingly, the charges against Faneuil were dropped.

So the main thrust of the case against Martha Stewart rested on the testimony of a man who changed his story in order to free himself from the wrath of the United States Government.

It's interesting that none of the news reports I read or heard after the guilty verdict mentioned that star witness Faneuil had traded his testimony for his freedom.

Modern America

So here we are in modern America a place where anyone can be charged with anything. And if there's no law against what you've done, the prosecutor can call it "conspiracy," "obstruction of justice," or "lying to investigators" because you claimed to be innocent.

Aside from Saddam Hussein, the Devil of the Day right now is the corporate executive. Many of these businessmen have been playing by the very rules set down by the government. But those rules aren't rules of law; they're rules of men, and they can be changed at a moment's notice.

While TV commentators "tsk, tsk" about the heinous acts supposedly committed by corporate executives, while George W. Bush reminds us periodically that CEOs have been "cooking the books," the truth is that neither George Bush, the TV commentators, you, nor I have the faintest idea how the books were kept or how they should have been kept. All we know are the stories that self-serving government employees have fed to us.

For example, I heard Fox commentator Bill O'Reilly say that Dennis Kozlowski (of the Tyco case) should get 20 years in prison. But all Bill O'Reilly knows about the case is what the government has told the press and the TV networks.

Prosecutors make names for themselves by indicting high-profile people and by padding their conviction records. The latter is easy to do. All that's required is to indict someone for a dozen crimes, involving 20 or 30 years of prison time, and then offer to drop two thirds of the charges if the defendant will plead guilty to the remaining charges.

You may not be aware that hero de jour Rudolf Giuliani first made a name for himself this way as a U.S. attorney in the 1970s and 1980s prosecuting so-called "white collar crime." Today numerous other government employees are feeding off celebrities and ordinary people like you and me.

Anyone can be grist for a prosecutor's conviction record. The Drug War has provided a bonanza for U.S. attorneys. Getting a conviction on drug charges is a slam-dunk. The defendant doesn't have to have dealt drugs or even to have used them. Just charge him, scare him to death, and get him to plead guilty to a lesser charge. Or promise someone a lighter sentence if he'll name other people (with no concern for the guilt or innocence of the other people).

The November Coalition has documented scores of these cases. For one example, look what happened to Debbie Vineyard. Here are some more examples.


Yes, I'm outraged by the Martha Stewart case.

She probably will go to prison on invented charges and suspect evidence.

Is there anything to be learned by all this?

Yes. What you know about these cases is only what the government claims. Just as with Iraq, everything we think we know actually originates with some government employee leaking the "truth" to people in the press, who dutifully report these planted claims as facts.

This is why the Founding Fathers were determined that the federal government would have nothing to do with such matters as business dealings. They knew that government officials armed with threats of fines and imprisonment would inevitably abuse such powers.

Thomas Jefferson wanted America to be an agrarian society, but he didn't use the power of his office to aid farmers at the expense of commercial interests. He knew that politicians must be bound down by "the chains of the Constitution," as he put it.

Today, however, the guns of the government are available to force you and me to conduct our lives in whatever way such paragons of virtue as George Bush or John Kerry want us to live.

It seems that nothing is a matter of persuasion anymore. Everything is a criminal matter subject to fines and imprisonment.

Whatever isn't compulsory is prohibited.

Read "Free Martha Stewart!," June 4, 2003