Martha, Martha, Martha
by Ari Armstrong
The following column originally appeared in the March 18, 2004, edition of Boulder Weekly.
Martha Stewart was convicted mostly because she's condescending and rich. According to Reason magazine, one juror said Martha was "arrogant;" "she thought she was better than everyone else." Did she lie about her stock dealings? I have no idea. She tells a plausible story, whether it's true or just a cover. But prison? I mean, come on. I for one would rather my federal tax dollars went to fund something more useful -- mohair subsidies, say.
I chortled when I read Martha's "crimes" consisted in part of lying to the FBI. Having watched Mike McNulty's films about Waco, I'm reasonably confident the FBI has not always been completely truthful itself. Here's a thought: whenever someone is convicted of lying to a government agency, the defendant can reduce the sentence by 10% for every documented instance of dishonesty involving the agency within the last decade.
Let's assume, though, for the sake of argument, that Martha indeed lied about her stock dealings. So what? The left has promoted what we might call the "Clinton Principle:" if a particular action isn't very important or very bad, lies about that action aren't very important or very bad, either.
Martha was never charged with "insider trading." If she lied, that was petty and stupid. But criminal? Americans lock up a greater percentage of their fellow citizens than in any other nation on Earth. Our obsession with punishment comes at the expense of true justice and, I think, reveals something dark about our national character. How is anyone better off when federal persecutors spend our money to imprison America's wealthiest muffin baker?
About "insider trading." What the hell is it? According to attorney James Ostrowski, writing for the Ludwig von Mises Institute, the "insider trading" federal statutes and executive rules are arbitrary and capricious, interpreted and enforced by the politically-appointed Securities and Exchange Commission. Ostrowsky describes them as "victimless (nonexistent) crime laws," part of a vast network of regulations that allow enforcers to "eventually turn up evidence of some crime" on practically anybody.
Leftists who suppose the rich write the laws to screw the poor are only half right. It so happens that the most politically connected are usually rich, but that doesn't mean the independently wealthy -- those who shun the political power establishment -- are let off the hook. Indeed, the wealthy who spurn the political class are often convenient scape-goats when the politically connected, in Ostrowski's words, go "whoring after the votes of the depraved."
By Ostrowski's reading, in no way can Martha be considered an "insider trader" according to the rules as written. However, a 1983 Supreme Court decision in effect made "outsider trading" a crime by judicial fiat. Ostrowski believes the court decision "has no basis in the statute or the regulation interpreting that statute," yet it created "a new, judicially created crime of outsider trading that has ruined lives and will do so again soon."
What is the solution, then? Ostrowski isn't convinced so-called "insider trading" is immoral or economically inefficient. The best approach, he believes, is to allow companies to compete on the basis of stock policies. If it turns out that rules against insider trading are economically beneficial, then "[c]orporations that wish to maintain a healthy stock price and raise capital will announce and enforce strict policies against insider trading." Violations of these private regulations can be remedied through common-law civil suits.
John Berntson, a former chair of the state Libertarian Party, notes "the general feeling is that Martha, somehow, enriched herself at the expense of others." However, he adds, "The people who bought the stock were going to buy stock in any case. The only thing that she and the other sellers might have caused is a quick decrease in stock price, which would have actually helped the 'victims.' The people who held the stock and did not know of its impending fall did, in fact, lose money, but Martha did not enrich herself at their expense."
Harry Browne, a best-selling financial writer and Director of Public Policy for the American Liberty Foundation, notes people use special equipment and special knowledge all the time to make money. For instance, some people can afford "more investment tip sheets" than others. "Since when it is a crime in America to use your wits, your knowledge, your talents, and -- yes -- your contacts to make money?" he wonders.
William L. Anderson and Candice E. Jackson, also writing for the Mises Institute, point out that journalists at major papers profit from "insider" information on a daily basis -- though that didn't stop them from strapping Martha to the stake for the same "crime."
Barring a successful appeal, Martha is headed for prison. Meanwhile, the politicians who run the patently fraudulent Ponzi scheme laughingly called "social security" rest secure on their perches. Always they are ready to descend from the skies to pick the bones of the productive in order to subsidize the politically powerful. But we can rest peacefully knowing the American legal system has produced the most beautifully decorated prison cell in history.