A very famous scandal that has embedded ourselves in our history is the Martha Stewart scandal of 2003. Martha Stewart is a true success story of the American dream in effect. Starting as a housewife, Martha created her career by turning her previous business experience and career into a household name and an enterprise. Having established Martha Stewart Living Omnimedia, Inc. (MSO), which handled everything from print to television to merchandising, with her business partner Sharon Patrick in 1997 the company went public in October of 1999. She became entangled in an insider trading scandal only 4 years later.
Stewart was advised by her stock broker, Peter Bacanovic, that ImClone’s cancer treatment drug had been denied licensing by the FDA. Bacanovic was also the broker for ImClone CEO Sam Waksal who informed him of the FDA decision and was liquidating his holdings as well. Bacanovic shared this information with Stewart who owned 4000 shares of ImClone. Because the drug meant a major investment for ImClone, the FDA refusal to administer it through drug trials was devastating information for the financial health of the company. The cancer treatment drug had already cost millions to develop and would have no promise of future cash flow following the FDA announcement.
Stewart used this inside information to liquidate her holdings in the company as well. When the knowledge about the cancer drug became public, ImClone stock dropped 16 percent following the announcement which would have totaled $45,673 in losses on her shares. After being investigated for insider trading Stewart was found guilty in March 2004 of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators. She was sentenced to five months in a federal correctional facility and a two-year probation. Following the scandal, the damage to Stewart’s company had been done.
The Essay on Drug Companies and Ethics
After researching pharmaceutical companies, I quickly realized this is a very controversial topic. I’m not certain anyone in many of these companies have very many moral standards. Drug companies seemed to be very profitable from the researchers to the drug reps that deliver “gifts” and sample meds to the doctor’s offices that push their medications. Many activists will argue that drug companies ...
MSO suffered a huge blow as Stewart as forced to resign as president, chairwoman and CEO of her own company. She was also banned from serving any role that would allow her to prepare, audit or disclose financial results of any public company before August of 2011. When the MPO stock hit the New York Stock Exchange in 1999 it debuted at $18 per share; however, it shot up to $38 per share. Today, the stock is worth a mere $4.35 per share following a series of lawsuits from Macy’s and JC Penny’s for other contract infractions and poor business practices.
I feel the entity will survive because Martha Stewart has what is called a cult following. While the company will never return to the glory of it’s IPO and $38 stock price, it’s unlikely that it will every close entirely. The company still offers many services and products including linens, cookware, home furnishings, magazine publications and studio publications. However, the company may retain the Martha Stewart name, they do not feature Martha herself nearly as often. The photos have been removed from many of the product lines as marketing for the brand has been tarnished. Stewart herself is no longer a shining beacon of quality and trust, but her publications and products reach beyond that into a brand name and consumers still desire.
Bibliography
Gekas, Alexandra. “8 Infamous Wall Street Scandals.” Woman’s Day, n.d. Web. 11 May 2014.
“Martha Stewart Living Omnimedia.” Wikipedia. Wikimedia Foundation, 05 July 2014. Web. 10 May 2014.
“Martha Stewart Living Omnimedia, Inc.: NYSE:MSO Quotes & News – Google Finance.” Martha Stewart Living Omnimedia, Inc.: NYSE:MSO Quotes & News – Google Finance. N.p., n.d. Web. 11 May 2014.
The Essay on Insider Trading Stewart Martha Information
Insider Trading Martha Stewart, the countries top icon for homemaking has been in the eye of the public since June 2002, but not for her craftiness or culinary abilities. Stewart instead has the spotlight on her for crimes of insider trading. A tip from her former broker Peter E. Bacanovic, persuaded her into selling her IMClone stock after sharing information about a close friend of Stewart's ...
“Martha Stewart.” Wikipedia. Wikimedia Foundation, 05 July 2014. Web. 10 May 2014.
