# Martha Stewart got 5 months in Prison **URL:** \ **Category:** Cafe Society\ **Created:** [July 16, 2004, 2:39pm UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416 "2004-07-16T14:39:50Z")\ **Posts on this page:** 13\ **Page:** 3
**Author:** ![OtakuLoki](https://avatars.discourse-cdn.com/v4/letter/o/ac8455/32.png) [@OtakuLoki](https://boards.straightdope.com/u/OtakuLoki)\ **Post date:** [July 18, 2004, 5:42am UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/41 "2004-07-18T05:42:41Z")
> [@watsonwil](#): > > IAs for Lay, I find it interesting that he has become a symbol of everything that is bad in business. I am still open to the notion that he may be guilty of negligence but not intentional actions (re: asleep at the wheel). Before I say “he deserves to go to prison” I’d like to see some evidence. (partially because I always liked the guy. He throw out the first pitch at the new baseball park[then Enron Field] and received a standing ovation similar to ones for Nolan Ryan and Hakeem Olajuwan.) Hell, he probably did it, but I think that his name has become more of a partisan talking point than a legitimate discussion… The thing that I can’t forgive Lay for doing is telling employees that the stock is still solid, they should continue investing, and hold on to their stock… while he sold off his own stock. I don’t have a reference for this, but I seem to recall it was fairly well substantiated. I tend to look for the ideal of loyalty up/loyalty down, and this was a complete betrayal (if it did happen the way I remember it.) of his employees. ---
**Author:** ![Dewey\_Cheatem\_Undhow](https://avatars.discourse-cdn.com/v4/letter/d/13edae/32.png) [@Dewey\_Cheatem\_Undhow](https://boards.straightdope.com/u/Dewey_Cheatem_Undhow)\ **Post date:** [July 18, 2004, 1:31pm UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/42 "2004-07-18T13:31:17Z")
> [@OtakuLoki](#): > > The thing that I can’t forgive Lay for doing is telling employees that the stock is still solid, they should continue investing, and hold on to their stock… while he sold off his own stock. I don’t have a reference for this, but I seem to recall it was fairly well substantiated. I tend to look for the ideal of loyalty up/loyalty down, and this was a complete betrayal (if it did happen the way I remember it.) of his employees. This is a factual bone of contention between the DOJ and Lay. Lay claims that he did buy shares when he was talking it up, and his sales were solely due to margin calls (i.e., he had to sell, indeed, the shares were sold automatically under brokerage rules). The DOJ responds that he sold a hell of a lot more than he bought. Lay responds that, well, he had a shitload of shares held on margin. Who’s right? Who knows! That’s one thing the jury will be considering. ---
**Author:** ![hajario](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hajario/32/171_2.png) [@hajario](https://boards.straightdope.com/u/hajario)\ **Post date:** [July 18, 2004, 2:19pm UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/43 "2004-07-18T14:19:37Z")
As has been said already in the thread and ignored by many of you: -She was convicted of insider trading _and_ obstruction of justice. -She got the _minimum_ possible sentence under the Federal Guidelines. -What the fuck does Lay have to do with this and why are you so sure that he will walk anyway? Haj ---
**Author:** ![middleman](https://avatars.discourse-cdn.com/v4/letter/m/e9a140/32.png) [@middleman](https://boards.straightdope.com/u/middleman)\ **Post date:** [July 18, 2004, 2:50pm UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/44 "2004-07-18T14:50:58Z")
Hajario, that simply isn’t correct. She was ONLY convicted of obstruction. NO conviction was reached on insider trading! ---
**Author:** ![Walloon](https://avatars.discourse-cdn.com/v4/letter/w/fbc32d/32.png) [@Walloon](https://boards.straightdope.com/u/Walloon)\ **Post date:** [July 18, 2004, 5:51pm UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/45 "2004-07-18T17:51:12Z")
**Hajario** , you’re simply wrong. Martha Stewart was not convicted of insider trading. That charge was dropped. ---
**Author:** ![hajario](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hajario/32/171_2.png) [@hajario](https://boards.straightdope.com/u/hajario)\ **Post date:** [July 18, 2004, 6:36pm UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/46 "2004-07-18T18:36:33Z")
> [@Walloon](#): > > **Hajario** , you’re simply wrong. Martha Stewart was not convicted of insider trading. That charge was dropped. Sorry, my bad. I was trying to point out what I thought were the important points that others brought up and I failed to do adequate research. Actually, I failed to do any research. Haj ---
**Author:** ![Evil\_Captor](https://avatars.discourse-cdn.com/v4/letter/e/f17d59/32.png) [@Evil\_Captor](https://boards.straightdope.com/u/Evil_Captor)\ **Post date:** [July 18, 2004, 8:40pm UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/47 "2004-07-18T20:40:29Z")
> [@watsonwil](#): > > I don’t know much about Securities regs (though I am a lawyer), but is it insider trading when giving info about a pre-IPO? > > Pre-IPO, the company is not publicly held. Is it governed by the insider trading laws? > > Anyone know for sure? OK, you understand that the whole point of insider trading laws is to keep some stock purchasers from having an unfair advantage over the rest, right? Thus fostering the notion that the stock market is a fair and open market rather than a sleazy racket run for the benefit of big stockbrokers and their most well-heeled clients. Now, if a stockbroker is giving tips about hot IPOs to SOME prospective clients and NOT giving them to other prospective clients, or to existing clients, isn’t that EXACTLY what all the insider trading laws were written to prevent? Isn’t the stockbroker pretty much stealing from his existing client base under those circumstances, since otherwise they’d have the benefit of this knowledge, too? So we have two conditions: handing out info about hot IPOs to SOME clients and not others is illegal, in which case the stockbrokers in question need to go to jail. Or handing out info etc etc is NOT illegal, in which case they guys who run the SEC should go to jail, because they’re obviously creating loopholes so their guys can get away with highway robbery. Hey, I’m waiting for the mass trials to begin here … but I’m not holding my breath. ---
**Author:** ![Walloon](https://avatars.discourse-cdn.com/v4/letter/w/fbc32d/32.png) [@Walloon](https://boards.straightdope.com/u/Walloon)\ **Post date:** [July 18, 2004, 9:58pm UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/48 "2004-07-18T21:58:47Z")
**Inside information** : Material information about a company which is known by the company’s board of directors, management, and/or employees but not by the public. The SEC forbids trading based on such information. ---
**Author:** ![middleman](https://avatars.discourse-cdn.com/v4/letter/m/e9a140/32.png) [@middleman](https://boards.straightdope.com/u/middleman)\ **Post date:** [July 18, 2004, 10:23pm UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/49 "2004-07-18T22:23:56Z")
I understand insider trading. It is a law for PUBLICLY TRADED companies. What I am asking is whether the law covers IPOs PRIOR to the public offering. Unless there is some law covering the gap, then it wouldn’t be insider trading to give inside information about a privately held company (which is what an IPO is prior to listing on a stock exchange.) If it isn’t covered, then it isn’t insider trading, and no one should go to jail because of that. But, I am wondering whether there IS some law covering pre-sale IPOs. ---
**Author:** ![Declan](https://avatars.discourse-cdn.com/v4/letter/d/ecae2f/32.png) [@Declan](https://boards.straightdope.com/u/Declan)\ **Post date:** [July 18, 2004, 11:24pm UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/50 "2004-07-18T23:24:29Z")
> [@WordMan](#): > > Breaking News - jeez, seems like overkill for $40,000, which is my understanding of what the price difference yielded. > > If she gets 5 months for that, someone like Ken Lay should be worried about the death penalty… Considering some of the replys so far , one wonders what would have happened if Ms Stewart got five years in a normal federal pen. Umm, thats assuming of course that she is allowed to go to one of the club feds, rather than the above mentioned normal fedpen. Declan ---
**Author:** ![Dewey\_Cheatem\_Undhow](https://avatars.discourse-cdn.com/v4/letter/d/13edae/32.png) [@Dewey\_Cheatem\_Undhow](https://boards.straightdope.com/u/Dewey_Cheatem_Undhow)\ **Post date:** [July 19, 2004, 1:39am UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/51 "2004-07-19T01:39:04Z")
> [@watsonwil](#): > > But, I am wondering whether there IS some law covering pre-sale IPOs. Corporate lawyer checking in. The answer to your question is **yes**. Indeed, the time immediately before and after an IPO is subject to stringent regulations as to what a company can and can’t say. It is called the “quiet period” and lasts from immediatly prior to filing a registration statement until after the SEC declares the registration statement effective. During the quiet period, a company cannot, outside of narrow exceptions, make any announcements that are not reflected in the offering documents. Here’s a more robust description [from the SEC’s website](http://www.sec.gov/answers/quiet.htm) ---
**Author:** ![Dewey\_Cheatem\_Undhow](https://avatars.discourse-cdn.com/v4/letter/d/13edae/32.png) [@Dewey\_Cheatem\_Undhow](https://boards.straightdope.com/u/Dewey_Cheatem_Undhow)\ **Post date:** [July 19, 2004, 1:53am UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/52 "2004-07-19T01:53:39Z")
Also forgot: there is a lockup period, generally 90 days after the public offering, during which insiders cannot sell at all. So it would be hard for them to trade on insider information during the IPO launch in any event. ---
**Author:** ![middleman](https://avatars.discourse-cdn.com/v4/letter/m/e9a140/32.png) [@middleman](https://boards.straightdope.com/u/middleman)\ **Post date:** [July 20, 2004, 11:15pm UTC](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416/53 "2004-07-20T23:15:53Z")
Thanks Dewey. You’re always good for the answer! [Previous page](https://boards.straightdope.com/t/martha-stewart-got-5-months-in-prison/255416.md?page=2)