In June 2003, Sam Waksal, the co-founder and former CEO of ImClone was sentenced to seven years in prison and fined $4 million on charges of insider trading. He was found guilty of leaking confidential information to family and friends in the days leading up the release of a federal ruling that rejected the company’s Erbitux cancer drug. Among the friends said to have been tipped was Martha Stewart. She sold nearly 4000 shares on ImClone on the day prior to the regulator’s announcement. The sale saved her about $51 000 US. Stewart pleaded not guilty to charges of insider trading, conspiracy, obstruction of justice and making false statements to investigators. She argued that she had an agreement with her stockbroker to sell the shares if the price went below $60. The prosecution said Stewart had misled investigators by saying she did not recall if her stockbroker called on the day she sold her shares. The presiding judge dropped the insider trading charge and a jury convicted her of conspiracy, obstruction of justice and making false statements to investigators. Stewart was sentenced to five months in prison, five months home arrest, two years probation and fined $30 000. In January of 2006, a federal appeals court in New York upheld her conviction. Was Martha Stewart an insider in relation to ImClone? What are the problems with insider trading? Should insiders be prohibited from trading in shares? Why is difficult to prove improper insider trading?