|
To print article, click Print on your browser's File menu. Go back Posted 2/13/2004 |
|||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||
Add to MSN Stock List Message Board
Add to MSN Stock List Message Board |
|||||||||||||||||||||||||||||||||||
|
Extra Martha may win, but she's already lost The testimony most damaging to the Martha Stewart brand may be that she was abusive on the phone to a young assistant at Merrill Lynch. Many customers value quality of character over quality of product. By James B. Stewart Let's sidestep all the legal issues swirling around the Martha Stewart trial and cut to the chase: Did Stewart tell the truth when she told investigators, prosecutors, employees, shareholders, subscribers and shoppers and all the rest of us that she dumped all of her ImClone Now that star witness Douglas Faneuil has completed his testimony, I don't think you need me to answer that question. Stewarts story doesnt make sense First of all, as I wrote nearly two years ago, Stewart's $60 story never made any sense. A cursory look at the ImClone trading records showed that the stock had already dipped below $60 several times in the months before she finally sold, yet no sell order was executed. And now we learn from Faneuil, the young Merrill Lynch assistant who actually handled the trade, that by the time he had the crucial conversation in which Stewart decided to sell, the stock had already fallen to $58 and change. No sell order had been entered, nor was any mentioned in his phone conversation with Stewart. A Merrill Lynch executive further testified that no stop-loss order was entered in the computer on Stewart's behalf to sell ImClone at $60, even though her broker had used such orders in the past.
By contrast, Faneuil's version makes perfect sense: On the broker's orders, he told Stewart that Samuel Waksal, ImClone's chairman, and members of his family were dumping their shares, and she decided to sell hers, too. How simple. How plausible. Stewart, of course, is entitled to her day in court. The jury may acquit her; we know that after O.J. Simpson anything is possible. But don't count on her taking the stand. As a brand-name commodity, Martha Stewart can't risk the kinds of hostile questions that Faneuil endured, like whether he ever smoked marijuana. Stewart has already done her business untold harm by persisting in a legal strategy that seems to have been calculated to inflict maximum damage on her company. I can't imagine she'd risk doing even more. How testimony impacts Martha Stewart Omnimedia Indeed, the most damaging testimony to Martha, the brand, as opposed to Martha, the person, may not be that she lied about a stock trade, but that she was abusive on the phone to a young assistant at Merrill Lynch. I've always felt you can tell a lot about someone's character based on how much courtesy they extend to those occupying a lower rung on the ladder of wealth, power and status. This is a common attitude in the heartland where I come from, and I suspect many Martha Stewart customers feel the same. Wall Street, being far removed from people like this, seems to be taking a different view. Though Martha Stewart Omnimedia Too late to come clean? Which is too bad, because this whole proceeding would never have been necessary had Stewart simply been forthright and accepted the mild rebuke from the SEC she probably would've had to endure. As I wrote in this column back in 2002, Stewart "should stop hiding behind her lawyers, tell all the facts and let the chips fall where they will. She might find, by the way, that such forthrightness would earn her considerable goodwill at the Justice Department and the SEC." Is it too late to follow my advice? Maybe not. Stewart and her lawyers could still cut a deal, although it seems unlikely at this late stage. But if I were one of the prosecutors, I'd be willing to be pretty generous as long as Stewart was finally and completely honest with the public. After all, it's really in no one's interest to send her to jail for any extended period or to ruin her company. Even if she's found guilty, the punishment should be commensurate with the alleged crime. So at some point, Stewart's stock probably will be worth another look, though I'm staying away. Whatever the verdict, she already has exhibited such bad judgment and contempt for shareholders that I don't want to go near any company she controls. For market commentary every day, visit SmartMoneySelect.com. |
||||||||||||||||
|
||||||||||||||||
MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.