Wednesday, February 25, 2004
More on Martha Stewart
I've vacillated over the months over whether Martha Stewart should be held accountable for lying about receiving "insider" information regarding ImClone stock. A few weeks ago, I argued that if she went to jail, it would be due to her decision not just to fess up and pay the fine, forcing government to take her to court to penalize her. This article, however, makes an interesting counterpoint to that argument.
The article points out that the drug the FDA blocked, leading ImClone's CEO to sell and for an insider stock tip to be passed to the hapless Ms. Stewart, was later unblocked. That cancer-treating drug is now allowed to be sold in les Etats-Unis. Furthermore, the article questions whether its right in the first place for the FDA to have the right to arbitrarily block access to new drugs the way it does. Americans complain loudly and often (and for good reason) about the high price of medication. That cost is in no small part due to the years-long approval process drugs companies most pass through in order to bring a product to market.
Insider trading is a WEIRD law. You're not supposed to act on information you normally could be expected to act upon, simply because you have information that the general public doesn't have. Not that this would ever happen, but one could argue that programmers shouldn't be allowed to trade in stocks related to software companies, simply because they have access to information the general public wouldn't know anything about, much less understand. Granted, that's extreme, but it shows how odd insider trading laws are.
The article I referenced wonders whether it makes sense to treat Martha Stewart as an "insider," given that she isn't involved in any way in the the operations of ImClone. On the other hand, should an insider be allowed to tell all his friends to "get out now?"
One very good point the article makes is that its is ridiculous to claim Martha Stewart defrauded investors in her own company (Martha Stewart Living) by defending herself against government allegations. The prosecution argues that such a false claim negatively affected investors in her company. In other words, you better not defend yourself against a government allegation, otherwise we'll try you and convict you for negatively affecting the people who rely on you for making false statements. Twisted logic, truly, and that logic was rejected outright by the judge in Ms. Stewart's case.
I've vacillated over the months over whether Martha Stewart should be held accountable for lying about receiving "insider" information regarding ImClone stock. A few weeks ago, I argued that if she went to jail, it would be due to her decision not just to fess up and pay the fine, forcing government to take her to court to penalize her. This article, however, makes an interesting counterpoint to that argument.
The article points out that the drug the FDA blocked, leading ImClone's CEO to sell and for an insider stock tip to be passed to the hapless Ms. Stewart, was later unblocked. That cancer-treating drug is now allowed to be sold in les Etats-Unis. Furthermore, the article questions whether its right in the first place for the FDA to have the right to arbitrarily block access to new drugs the way it does. Americans complain loudly and often (and for good reason) about the high price of medication. That cost is in no small part due to the years-long approval process drugs companies most pass through in order to bring a product to market.
Insider trading is a WEIRD law. You're not supposed to act on information you normally could be expected to act upon, simply because you have information that the general public doesn't have. Not that this would ever happen, but one could argue that programmers shouldn't be allowed to trade in stocks related to software companies, simply because they have access to information the general public wouldn't know anything about, much less understand. Granted, that's extreme, but it shows how odd insider trading laws are.
The article I referenced wonders whether it makes sense to treat Martha Stewart as an "insider," given that she isn't involved in any way in the the operations of ImClone. On the other hand, should an insider be allowed to tell all his friends to "get out now?"
One very good point the article makes is that its is ridiculous to claim Martha Stewart defrauded investors in her own company (Martha Stewart Living) by defending herself against government allegations. The prosecution argues that such a false claim negatively affected investors in her company. In other words, you better not defend yourself against a government allegation, otherwise we'll try you and convict you for negatively affecting the people who rely on you for making false statements. Twisted logic, truly, and that logic was rejected outright by the judge in Ms. Stewart's case.
