Friday, July 16, 2004

Martha Stewart gets Jail and Selective Prosecution in America

It is being widely reported (Forbes) that Martha Stewart was sentenced to five months in jail today. Ultimately, it was the cover-up (lying to the authorities during the investigation) rather than the difficult to prove crime (insider trading) for which she will doing time. I believe, however, that this is a clear case of selective prosecution, and I'm surprised Martha Stewart's lawyers didn't try to argue this much at the trial or in the media. The amount of damage Martha Stewart did to the U.S. financial system was tiny compared to what Messrs. Lay, Ebbers, Skilling, & company did over at Enron and Worldcom, which involved the loss of billions of investor and Enron retiree funds and enormous loss of world confidence in U.S. financial markets. (Martha's problematic company, ImClone, eventually did get its product past the FDA, and investors ultimately did well. By comparison, Enron virtually vaporized.) Yet Lay's indictment was only rolled out recently, apparently just in time for the election. The major difference? Messrs. Lay, Ebbers, Skilling, & company made huge contributions to the Republicans, whereas Martha Stewart liked giving money mainly to the Democrats (who were not in power past the beginning of 2001).

Another factor was the fact that Martha Stewart was much more hated than the Enron boys had been prior to their indictments. According to one journal, she reportedly has a hormone problem that makes her unusually aggressive, explaining the popular portrait of an arrogant person capable of ferocious temper tantrums. She was supposedly hated by her neighbors in West Port, CT (and ultimately moved her main residence elsewhere as a result). She was supposedly very mean to the help. She supposedly even stalked her ex-husband.

Wow. By the time of her trial, no wonder she had so few friends in spite of her billions. Everyone loved to hate Martha Stewart.

Ken Lay, on the other hand, was just this nice preacher's son who just got mixed up in a fraud that cost the U.S. economy billions and ended the career (and retirement savings) of hundreds of his employees. And, more importantly, he gave money to the right political party.

And, after Enron, the Republicans had to find someone to prosecute to slow down the calls for the heads of their buddies, the Enron boys.

Martha Stewart, widely despised and obviously guilty of something (although of much less damaging crimes) made a tempting target to distract the public with.

Update 2004/07/16: The sentence was five months in jail, five months house arrest, and two years probation plus a $13K fine, which was the minimum for lying to federal investigators. "Free Martha!", you say? ;-). Oh, it's fun comparing billionaire Martha Stewart to usual down-and-out types that have spawned "Free" movements.

Martha did the crime, so guess she should do the time, as they say. The issue here is that it seems clear to me that, in the aftermath of scandals by massive Republican campaign contributors Enron, Worldcom, & friends, prosecutors seemed far more aggressive going after hated Democrat-contributing Martha Stewart and, in my view, far too easy on the rest. The latter, in my view, ultimately commited far more serious crimes and did far more damage to America.

Update 2004/07/17: Martha Stewart said yesterday "I'll be back." Very Arnold [Schwarzenegger], but it looks like she's still with us. Normally someone just sentence to five months jail would be stewing in the can right now, Martha has been granted the very unusual privilege of being free pending her appeal. So it does look like her celebrity and great wealth are getting special privileges. Then again, she's running (or used to be running) a Fortune 500 company that's contributing signifantly to the U.S. GDP, so maybe it's better she's out on appeal.

Normally, it would take at least 17 months for a running on a federal appeal (by which time Martha would have served her sentence were she an ordinary federal con). Successful appeals of federal criminal cases are very rare (less than 5% are successful), so it's likely in 17 to 20 months Martha will be spending time in jail. On the other hand, Martha Stewart probably has the best lawyers money can buy, so her chances are probably much better than most. And it looks like there were some problems with the orignal case: one juror lied about a past criminal conviction, and one of the key witnesses against her, a Secret Service agent, apparently lied about a handwritting analysis. And by that time there may be a new Administration in the White House that will probably move Justice Deparment resources from Democrat Martha Stewart over to finally properly investigating the far bigger Republican crooks at Enron and Worldcom. So she may get a "get out of jail free card" from the appelate bench, but only because she got special treatment by being let out of jail pending her appeal. Despite the obvious special treatment, I still say she's a victim of selective prosecution: We should have been hearing all about Ken Lays' appeal at this point, not Martha Stewart's. People know this, and this may be an additional explanation for the special treatment.