DEAR PROFESSOR
...y to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information. The perfect example of insider trading is the case of Martha Stewart selling her ImClone stocks. Martha Stewart (posted 09/02, updated 03/04) Summary of the case of Martha Stewart vs. The government charges that on Dec. 27, 2001, Stewart learned from her broker that Samuel Waksal, the chief executive of ImClone Systems Inc., was trying to sell his stock because he knew that the Food and Drug Administration would announce an adverse decision the next day about his company's cancer drug, Erbitux. Stewart then sold her own 3,928 shares at $58. When the news became public, the stock fell to $45, so Stewart saved about $50,000. Waksal pleaded guilty to insider trading and is serving a seven-year sentence. Stewart, who was a friend of his, wasn't charged with insider trading but instead was slapped with obstruction of justice and fraud counts; the government charges that, by making false statements about her ImClone sale, she was illegally trying to prop up the stock of her own company, Martha Stewart Omnimedia. In August 2002, Martha Stewart released over 1,000 pages of documents detailing her phone calls and emails related to her sale of 4,000 shares of ImClone Systems (IMCL) stock on December 27, 2001. On June 4th, 2003, a federal grand jury indicted Martha Stewart on nine counts of securities fraud and related charges (later dropped), including conspiracy and obstruction of justice in connection with her sale of ImClone Systems shares in 2001. Her stockbroker, former Merrill Lynch employee Peter Bacanovic, was also indicted (on counts including obstruction of justice and perjury). On March 5, 2004, Martha Stewart was found guilty on all 4 counts against...