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:
“My carelessness has cost too many people too much. It has cost
the thousands of shareholders in my company half the value of their
investment. It has taken its toll on the 600 employees of my
company, who have suffered through the uncertainty and distraction
of my problem while trying to do their jobs.”
“I have worked hard for everything I’ve got. Many people have
helped, but nothing was ever given to me. Don’t let my carelessness
in this one instance as a private investor do any more damage to
the people or products of Martha Stewart Living Omnimedia. I
deserve my punishment, but the employees, shareholders, and
consumers of the company don’t.”
4. Then shut up. Don’t offer to cooperate with the government
and don’t plead guilty to anything like conspiracy or obstruction
of justice, which automatically implicates others. That’s the
decent thing to do, and you can even brag about it. Tell the world
that you didn’t make any deals for leniency in exchange for ratting
out others. Mention that anybody who lied or covered anything up
did so only to protect you because you didn’t have the courage to
step forward.
People will respect that you told the truth and took full
responsibility. A $50,000 wire fraud will not get you put in prison
and your company will recover. May your biggest problem in 2003 be
the amount of calories some of those desserts really
contain.
Very Truly Yours,
Mike
P.S. - I’m giving you this advice free of charge, but if you do
pay me something, could we do it as a cash transaction? No reason
the government has to get its paws on this money, right?
