1. Identify the ethical transgressions that took place in this case.
2. When the connection between ImClone Systems and Martha Stewart was first revealed, analysts speculated that she would emerge relatively unscathed from any investigation, “forced at worst to return any profit she made from selling ImClone.” Does her subsequent jail sentence imply that she was targeted as a high-profile test case of insider trading? Why or why not?
3. Does the size of Stewart’s transaction (3,928 shares for about $227,000) make her behavior any more or less ethical than that of Waksal’s daughter who sold $2.5 million in ImClone shares at the same time as Stewart? Explain your answer.
4. What would prompt a highly regarded public figure such as Martha Stewart to obstruct the course of justice by failing to reveal the true nature of her sales transaction with the ImClone stock?
5. What do you think would have happened if Stewart had cooperated with federal investigators?
6. If Martha Stewart’s sale of ImClone stock really was a high-profile test case, what message do you think it sent to other high-profile investors?

At the end of December 2001, design guru Martha Stewart, chief executive of Martha Stewart Living Omnimedia, reportedly sold 3,928 shares of stock in a drug company called ImClone Systems. The 3,928 shares represented her entire holding in ImClone, and the sale fetched over $227,000 for Stewart, based on an average selling price of around $58 per share—not a large transaction by Wall Street standards. In fact, such an average sale, out of the millions of transactions that took place that day, should not have drawn any undue attention, until it was revealed that Stewart had a long-standing relationship with the chief executive of ImClone Systems, Dr. Sam Waksal, and that within a day or two of her sale, the Food and Drug Administration (FDA) would announce an unfavorable ruling on ImClone’s new cancer drug, Erbitux, which sent the stock plummeting from a high of $75 per share to an eventual low of only $5.24 per share in September 2002.