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The Investor

Since it became public knowledge that Martha Stewart sold her stock in a company called ImClone Systems stock the day before it announced that the FDA rejected its application for the cancer drug, Erbitux, she has suffered far greater losses than the extra $48,000 she made by not waiting until the following Monday to dump the stock.

The stock price of Martha Stewart Living Omnimedia, in which Martha owns 31 million of the 50 million outstanding shares, has fallen from $19 to less than $10. The company has admitted that legal and PR costs are eating into the bottom line, and advertisers and retailers are shunning the company. Plus, Martha herself must be shoveling money at all these lawyers and PR people. Remember when Martha's biggest problem was a nasty bio by Chris Byron?

Luckily for Martha, I have both the time and perspective to fix her problems. I just hope she's a regular reader of TAP.

Dear Martha:

You are really wasting your money on those lawyers and public relations firms. Allow me to give you a little free legal advice and you can get this whole thing cleared up pronto.

Your PR efforts are backfiring -- not just failing but making things worse. First, everything is through a spokesperson. Did you forget that one of the reasons you are worth a quarter-billion dollars (down from a half-billion before this all started) is that people trust what you have to say? Second, what was that business of having your lawyers asking the House committee to issue a statement clearing you? Socrates suggested something like that during the punishment phase of his trial, and instead of a fine, they made him drink poison.

More important, you have to get rid of those lawyers, or at least the appearance of lawyers. And stop proclaiming your innocence. As Michael Corleone said, "it insults my intelligence and makes me angry."

Just for the record, everyone knows you're guilty, not that it matters much. For you to be innocent, you would have to convince people that, sharing a stockbroker with the CEO (who was also a close friend), you coincidentally sold all your stock the day before the company announced that the FDA rejected the application for its main product. Maybe you will find twelve jurors you can convince; O.J. did. But have you checked the price of O.J. Simpson Omnimedia lately?

I have three simple words, and they are the three most important words any lawyer will ever tell you about this: take the blame.

In the real world, what you did isn't so bad. You made $50,000 that you shouldn't have. No one goes to prison for that; you won't either. The important thing -- and you wouldn't have those PR geniuses on the payroll if this wasn't true -- is that you protect your image and your business.

People constantly underestimate the American public's capacity for forgiveness. But the catch is that you have to ask for it and at least act like you mean it. Follow my instructions very carefully, and we can get you through this.

1. Dial 202-514-2601. That's the Justice Department's Criminal Division. Ask for Michael Chertoff. When you give them your name, they'll put you through. Tell them you will plead guilty to a single count of wire fraud. Absolutely don't plead to conspiracy or obstruction of justice. They may give you a hard time on this, but they'll cave.

2. Make the following public statement. No spokesperson. You can issue it in writing but you have to appear in person afterwards. (Try Larry King.)

"I am guilty of selling ImClone Systems stock while having information not available to other investors. If I had waited until everyone else had the same information, I would have made $50,000 less on the transaction. That is not substantial to my net worth, but it was substantial enough for me to ignore the law, and I am sorry. I spent a carelessly small amount of time making this decision, and I will spend the rest of my life regretting it and trying to make amends. My carelessness, however, is not an excuse or a mitigating factor."

3. Defend your company but not yourself. Again, here is all you need to say:

topics:
Business, Law