June 10, 2003
Martha and the Golden Goose.
by Donald G. Mashburn

With corrupt CEOs and other bandits of the boardroom walking around free, one can’t help but wonder at the federal indictment of Martha Stewart. One of America’s best-known businesswomen is charged with, among other things, altering a telephone recording, conspiracy, making false statements and obstruction.

The indictment is a grab bag of charges; all serious, some questionable. The more questionable charge has to do with Stewart’s early statements proclaiming her innocence, which the government claims were to protect the stock price of her company, Martha Stewart Living Omnimedia. That claim seems to assume that Stewart should have publicly confessed before she knew what the charges would be.

Oddly enough, the indictment does not charge Stewart with insider trading, when she sold about 4,000 shares of ImClone stock worth around $200,000. After the federal indictment, the Security and Exchange Commission (SEC) filed a civil action to force Stewart and her broker to pay more than $45,000, the estimated loss Stewart avoided by selling her stock.

All this is background to a puzzling lack of action by both federal criminal investigators and the SEC. Where are the indictments of Enron’s Ken Lay, WorldCom’s Bernard Ebbers, Global Crossing’s Gary Winnick?

What these not-so-worthies have in common is that they got obscenely rich selling their companies’ stock while the firms went to pot in a hand basket. Lay allegedly sold Enron stock worth $100 million, while Enron slid into the bottomless pit of bankruptcy and scandal. Reuters reported the figure might be “closer to $184 million.”

For 2001, Lay reportedly was paid $67.4 million in salary, bonuses and stock. Enron also loaned Mr. Lay more than $70 million in 2001. This from a company already well on its way to bankruptcy from lack of financing.

WorldCom’s Bernard Ebbers just couldn’t seem to get enough of this world’s goodies. He bought Canada’s largest ranch (500,000 acres), sprawling timberlands, a marine company he turned into a yacht servicing firm, farms and other possessions for which no complete inventory is available. Along the way, Ebbers received low interest loans reported variously at $366 million to $430 million from his own company.

The loans and Ebbers highly lucrative compensation arrangement with WorldCom made the golden goose’s capacity appear limitless. But Ebbers has some added legal problems. Investigators now report that he participated in meetings held to discuss how to inflate the WorldCom’s revenue.

However, Global Crossing’s Gary Winnick gets the trophy for wringing the most out of the golden goose. Winnich sold some $735 million worth of stock, as Global Crossing went from sailing the high seas of corporate growth to the bottom of the bankruptcy sea.

So, Martha Stewart, with her reported avoidance of $45,000 in losses, by bailing out of ImClone stock, is as pure as the driven snow compared with the high roller robber barons of corporate giants like Enron, Global Crossing and WorldCom.

The corporate crime enforcers who brought their heavy boot down on Martha Stewart seem to have gone barefoot during the corporate excesses of recent times. Stewart’s stock deal is the equivalent of jaywalking, while the top corporate greed kings got away – so far – with robbing the bank, shooting up the town, and laughing at the sheriff as they rode out.

Martha Stewart’s real crime seems to be her success and her “perfect” way of doing things. Being a former broker, and a successful can-do woman, she probably made a few enemies on her way to the top. But to her credit, she didn’t steal or rob her way to success.

If she had been just another hairy-legged good ol’ boy, her relatively small stock deal probably would have gone unnoticed.

Martha may have plucked a feather or two from the “golden goose,” but Lay, Ebbers and Winnick squeezed it to death, then tried to eat it whole – blood, guts and feathers.