President Trump says he wants to pardon the happy homemaker Martha Stewart and commute the sentence of disgraced former Illinois Gov. Rod Blagojevich. I’ll leave the rationale behind Trump’s Blago decision to those more familiar with Illinois politics and the nuances of “Celebrity Apprentice,” which Trump produced and Blago starred in before he was sent to federal prison on bribery charges.
Martha Stewart’s legal issues, on the other hand, are something I can speak about because I was on the front lines reporting on what ultimately sent her to the federal prison in Alderson, West Virginia, known as Camp Cupcake. She served a five-month term for obstructing a federal inquiry led (coincidentally) by current Trump nemesis and then U.S. Attorney James Comey.
Trump has to hate Comey the way most people need to breathe. He likely sees Martha Stewart and her pardon as something that will help him prove Comey is a lying scoundrel who deserved to be fired as his FBI chief. The idea is that Comey has no problem investigating and jailing innocents like the president himself and the aforementioned happy homemaker.
On its face, Martha Stewart seems like a good way to make Comey sweat. Comey prosecuted her in 2003 at the height of her fame and stature in the business world for obstructing a non-crime (more on this later). Meanwhile, her brush with federal law enforcement is receding in memory as is the unfortunate outcome of her once-mega media company, Martha Stewart Living Omnimedia, which was sold for a song in 2015 after massive mismanagement.
Most people probably don’t remember that she earned the moniker “The Domestic Diva” for her sage advice on cooking and other domestic duties as well as her reputation for being difficult.
Yes, with time, Martha Stewart’s rougher edges have been worn smooth, and these days, with television specials, new products and a VH1 show co-starring rap artist Snoop Dogg, she’s once again a star.
In other words, she’s the perfect Trumpian vehicle to bash Comey.
The jury, of course, is still out on whether Trump is innocent of anything from working with the Russians to tilt the 2016 election his way to his firing of Comey last year while he was investigating the alleged interference. And I’ll leave the aftermath of Comey’s firing – aka the hiring of Special Counsel Robert Mueller and his probe of Trump – for another column.
But I do know this: Stewart was far from innocent in the case that led to her stint in prison back in 2004. Any attempt to make her a martyr for wrongful imprisonment in order to make Comey seem the grim reaper who picked on poor Martha (and by extension poor Donald) should in normal circumstances backfire just by a simple examination of the facts.
I say “normal” only because the Trump candidacy and presidency often defy what is generally considered normal. Yes, all politicians lie all the time, but when was the last time you heard one make up stuff about the size of his inaugural crowd or his hands? Recall: This is the guy who suggested Ted Cruz’s old man may have helped assassinate JFK and mocked John McCain’s war record while Trump sat out Vietnam because of heel spurs. Real news is derided as “fake news.” There are real facts, and what Trump’s team of spinners call “alternative facts,” which is, of course, a euphemism for BSing.
And yet he still captivated enough of the GOP base to win the nomination and then the presidency.
So my betting is that in the coming days we will hear from Trump, who will use Stewart’s downfall back in the day as a model of prosecutorial overreach in order to score some points against that big meanie Jim Comey. Trump’s fan base and more than a few pundits will applaud the effort, but if you care about the real facts as opposed to the alternative variety, you should be outraged that the president is even considering a pardon, much less using it to hammer Comey.
Back in 2002, I was a reporter at The Wall Street Journal who covered the big investment houses. The main topic of the day was a raft of scandals that swept Wall Street and corporate America: Enron, WorldCom, conflicted stock research that brokerages used to tout crummy internet companies that paid them big investment banking fees. I covered all of them.
The shenanigans that took place underscored just how much of Wall Street was an insider’s game. Enron executives sold stock before the company went under. WorldCom’s top people made boatloads of money before they blew the place up. The Wall Street analysts who touted these stocks in research funneled to small investors were some of the highest paid people in the country. The investors who relied on their research were left holding the proverbial bag of crap. They were the last people to know when it was time to sell stocks pumped up by this greed and avarice, and they lost tons of money.
Martha Stewart’s stock trades fit nicely into this pool of cess. She was close friends with a biotech executive named Sam Waksal, the founder of a company called ImClone. She held shares in the company, and then right before an announcement that would crush the stock, she sold those shares.
She was one of several people associated with the company, Waksal included, to have the luck, skill or whatever to bail before the event would trigger massive losses for other investors.
As someone who has covered insider trading for years, I can tell you these types of trades, occurring right before a triggering event, always prompt scrutiny from securities regulators. ImClone wasn’t some crummy penny stock; it was then an up-and-coming drug maker with a promising anti-cancer drug that made news when it received a negative review from the government.
People lost significant sums of money not knowing the information Stewart traded on. When something like that happens, the regulators pounce.
Among the people they called in to discuss the trades were Waksal and then Stewart. The explanation for her amazing timing insulted the intelligence of investigators: She said she had a pre-determined order to sell the stock with her broker at Merrill Lynch. Merrill, as it turned out, had no such official record of what’s known as a stop-loss order. Her evidence that such an order existed: A notation written on a Merrill Lynch worksheet showing the stop-loss order would kick in when shares of ImClone hit “@60,” or at $60.
Comey, then the U.S. attorney for the Southern District of New York, didn’t charge her with criminal insider trading, but instead decided to charge her for lying to federal investigators and obstructing their investigation. He had a strong case. Prosecutors believed the worksheet was altered after Stewart and her broker caught wind of the Securities and Exchange Commission’s investigation of the trades; the brokerage assistant at Merrill testified that he gave Stewart the tip that Waksal and some of his family members were unloading their stock. Such information is supposed to be kept secret because when company insiders sell, it’s a sign the company is in trouble.
Stewart denied the charges vehemently, but the jury ultimately believed the government, leading to Stewart’s relatively short stay at Camp Cupcake.
Stewart’s defense – and I’m certain Trump’s rationale if and when he pulls the pardon trigger – is that Comey was being overly aggressive. He never charged her with the underlying crime of insider trading; thus she was lying about a non-event.
And that’s true as far as it goes, which isn’t very far. The vagaries of the insider trading law prevented Comey from pursuing a criminal case: Stewart didn’t trade on the information that Waksal sold his shares on, namely the negative government decision on the ImClone drug. That would be trading on what’s known as material, nonpublic information that’s “misappropriated,” or stolen, from shareholders.
She sold because she was told that Waksal was selling – nonpublic information that doesn’t quite add up to a criminal charge.
Still, Comey and the SEC, the federal agency that closely monitors such suspicious trades and brings civil fraud cases, were well within their rights to investigate why she sold when she did given her relationship with Waksal, who went to prison for criminal insider trading. Obstructing a criminal and civil probe is still a crime even if no underlying crime was committed.
Even more: Stewart did face insider trading charges from the SEC, which charged her with civil violations and ultimately reached a settlement that included fines and other sanctions. Stewart neither admitted nor denied wrongdoing.
Sure, Comey didn’t think he had enough evidence to push for a criminal insider trading case, but in my view that shows he has at least a modicum of prosecutorial restraint. But the SEC did, and lying to that agency is pretty reckless stuff, particularly if you run a publicly traded company.
James Comey certainly has his faults, and his probe of Trump and Russian collusion might turn out to be a big nothing burger. But if Trump really wants to pardon Martha Stewart and use Comey’s prosecution of her to make a point, that really would be fake news.