Was Martha Stewart Guilty Of Insider Trading? New Doc Explains Her Case

Twenty years ago, Martha Stewart went to prison. But why, exactly? Martha, a new Netflix documentary, revisits the lifestyle mogul’s prolific career and the trial that forced her to change course.

What Stewart did to receive a five-month prison sentence has sometimes been referred to as insider trading. However, as viewers see in the doc (which premiered on Oct. 30), she was found guilty of something else altogether.

In Her Own Words

In Martha, the titular entrepreneur discusses being on vacation in 2001 and getting a message from her stockbroker, Peter Bacanovic, about her stock in the biotech firm ImClone.

“It was a very short conversation, saying, ‘The stock’s going down, I think you should sell,’” Stewart said. “And I said ‘Good, sell.’”

Later, in 2003, Stewart and Bacanovic would be charged with illegal insider trading (or securities fraud). The Securities and Exchange Commission alleged that Stewart had acted on an “unlawful tip” from Bacanovic. She was also friends with Sam Waksal, ImClone CEO, who denied giving Stewart insider information about his company not receiving FDA approval on a new drug.

Looking back at the time in Martha, Stewart said her legal team’s guidance to “keep quiet” during the media fallout was “bad advice.”

The insider trading charges from the SEC were later settled. However, Stewart was separately indicted by the U.S. Attorney’s Office for the Southern District of New York. As seen in Martha, lead prosecutor James Comey said at the time that Stewart’s case was “about lying — lying to the FBI, lying to the SEC, and lying to investors.”

Though Stewart pleaded not guilty, she was ultimately convicted of conspiracy, making false statements, and obstruction of agency proceedings, per PBS News.

Martha Stewart’s Prison Sentence

In October 2004, Stewart began a five-month prison sentence at Alderson Federal Prison Camp in West Virginia.

In Martha, she describes the trial and surrounding period as a “horrifying” ordeal. “To be a trophy for these idiots in the U.S. Attorney’s Office — those prosecutors should have been put in a Cuisinart and turned on high,” she said. “I was a trophy — a prominent woman, the first billionaire woman in America. We got her.”

Stewart’s former son-in-law and lawyer, John Cuti, felt similarly. As he put it in the documentary, “Martha was a convenient way to look like they were doing something to combat corporate wrongdoing, even though her case had nothing to do with the corporation she ran.”

While Comey did not participate in Martha, he reflected on his decision to prosecute Stewart in his 2018 memoir, A Higher Loyalty. “The Stewart experience reminded me that the justice system is an honor system,” he wrote, per the Chicago Tribune. “We really can’t always tell when people are lying or hiding documents, so when we are able to prove it, we simply must do so as a message to everyone. People must fear the consequences of lying in the justice system or the system can’t work.”