Running Head: FINAL CASE STUDY ANALYSIS

Final Case Study Analysis

The Martha Stuart’s Insider Trading Scandal
Dulce M. Perez
May, 4 2018
Dr. Dora E. Vargas-Bustos
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In this case study I will be focusing on the trading case of Martha Stewart and all

the people who were involved. I will provide a short summary of her career followed by her

famous trial. After a short summary of Mrs. Stewart and the people involved, I will be

discussing the five exercises and discussions provided to us throughout the semester for

behavior/Ethics/Leadership I and then explain how some people involved in this scandal

lacked leadership skills and more.

Known mainly for her cooking show, Martha Stewart a businesswoman, writer, and

Living magazine featured has made many headlines for her wicked and criminal behavior

back in March 2004, where she went to trial for trading rumors. After a long six-week trial,

Mrs. Stewart was found guilty of conspiracy, four counts of obstruction, and making false

statements to the prosecutors and even the FBI, by providing them with misleading

information. She was then sentenced to only five years in prison with a fine of $250,000.00,

followed by five months of house arrest.

Although, Martha Stewart was not working alone. Along with Mrs. Stewart was

ImClone founder, Samuel D. Waksal who not only persuaded his friends and family to sell

ImClone, but also tried to sell it himself. People who followed Mr. Waksal into selling

ImClone’s were his daughter Aliza Waksal, his father Jack Waksal, general counsel John B.

Landes, vice president Ronald A. Martell, and four other executives. Luckily, Mr. Waksal

was later arrested in 2002 and pleaded guilty to several charges, which include security

fraud. Mr. Waksal was sentenced to seven to eight years in prison. Thankfully, there was

one person who made these arrests possible, Bacanovic’s assistant Doug Faneuil, the man

who exposed the truth to the FBI.

The ImClone System Incorporated is a medical company with about 1,100

employees, this system was made to develop medicine for the oncology area. It was until
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2001 when the stock price dropped at a fast rate, the reason behind was of course the

Martha Stewart case. Before any drug is sold it must go through a process and be approved

by the Food and Drug Administration, also known as the FDA and this process was not

done. Therefore, the drugs should have never been sold in the first place. As a matter of

fact, the ImClone System Incorporated has been corrupt since 1986.

Organizational health is extremely important, especially in the working

environment. It is what helps employees communicate better and helps the businesses and

organizations strive. The corruption in the ImClone System only makes me wonder if all

the employees knew what was going on and were maybe scared to say the truth. For all

those employees who got involved with illegal trades, it was their selfishness that made the

corporation lose many customers, therefore this corporation does not have organizational

health. The main way this can be changed would be by getting rid of the bad leaders and

hiring leaders who will bring good organizational health skills.

This case reminds me of the Liautaud case, although in this case patients were not

instantly killed because of protocol negligence. Instead, there was a lot of corruption and

because the employees were thinking of themselves instead of the customers the employees

lack the five ethical perspectives, which are Utilitarianism: Do the greatest good for the

greatest number, Kant’s Categorical Imperative: Do what is right despite the consequences,

Rawls’s Justice as a Fairness: Balancing freedom and equality, Confucianism: Building

healthy relationships, and Altruism: Concern for others.

Utilitarianism: Do the greatest good for the greatest number is based on thinking

about the consequences before making a choice. The employees from ImClone did not

think about the consequences, they instead chose to ignore them and continue through the

path of corruption. Kant’s Categorical Imperative: Do what’s right despite the

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consequences, would be more for those employees who might have known about the

corruption all along, but were too scared to speak out because of what cold happen to them.

Although, these employees would not have trouble with the law, they would face different

consequences, such as maybe losing their job. As for Rawls’s Justice as Fairness:

Balancing freedom and equality, means distribution of resources. In this case those

employees who were involved with illegal trading were not thinking about their co-workers

and were willing to do anything just to get more money for themselves.

Confucianism: Building healthy relationships explains how policies, norms,

procedures, and rituals are the ones that maintain healthy relationships within a business or

organizations. Confucianism highlights are the belief that organizations are built based on

relationships, recognizing employee’s status and power difference and that key virtues

include honesty, trust, kindness, and tolerance. For the ImClone company this seems almost

impossible, due to the fact that there is obviously no trust nor kindness. As for the last

ethical perspective Altruism: Concern for others, refers to helping others before helping

ourselves. In this case there was no Altruism whatsoever because all employees who were

involved in the illegal trade only thought of themselves.

As a leader of any business or organization one must always put the good of the

employees and company first. In the case of the ImClone company, the leaders of this

company acted unethically. Being a leader of a company means there is a high chance of

knowing everything that happens in the company; meaning all or most leaders must have

known about the illegal trade. As leaders they have the power in their hands and the ability

to influence behavior, therefore if leaders are involved in illegal activity the probability of

other employees following can be high. In this case Samuel D. Waksal had influenced

family, friends and employees to sell two drugs Erbitux and Monoclonal antibody.
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In order to keep a healthy working environment, one must first start by changing

oneself, it is important to implement the seven components of personal ethical development

because they help improve the way one thinks and acts. the first components is facing the

shadow side of the personality, in this case it gives all those employees who were

participating in the illegal trade to confront and acknowledge all those negative thoughts

that will hurt the company and co-workers. In this case those thoughts would include greed,

envy, selfishness, and the huger for more power and money.

In my opinion the second component does not really apply to this case and here is

why. The second component is discovering vocation, which means one must find what they

truly enjoy doing and pursue it. In this case employees are not participating in the illegal

trade because they do not love their job, maybe they really do like it, but we are only

human meaning the ability to fall and pursue one’s greed and lust for power can at times be

overwhelming and therefore it must be seen and treated with other components.

The third component is identifying personal values, which play a huge role in how

we make our decisions. In this case the employees should have separated their ambitions

and their job, in order to keep a professional and healthy working environment. The fourth

component is developing character, in this case the employees involved in the illegal trade

should take a deeper look at themselves and instead of focusing on all those negative

thoughts, they should focus on all the positive ones that can insure a better and good career.

The fifth component is creating a moral identity, which is the development of someone’s

character through ethical behavior. When it comes to this component it is important for

employees to develop it; in the case of ImClone, employees especially the leaders who

were involved should identify and develop their character because that is what defines their

actions, which have been negative.

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The six component is drawing upon resources; what did all these employees think of

when they got involved in the trade? it is said that if people mediate and become familiar

with their spirit side they turn to positive vibes, affecting everything they do in a positive

way. If these employees were to get familiar with their spiritual self, it would help by

taking away that greed and help them think about their co-workers and the company. The

last component is directing change from the inside out, once employees have become

familiar with themselves and have applied all six components to their daily working lives, it

is time to look at the final seventh component, in this case this could help employees

(especially the people involved) change and improve all those negative thoughts of greed

and lust for money and turn it to something positive.

Because I have never been involved in illegal activity and have never even thought

about doing such things, it is a bit hard to put myself in all these employee’s shoes. I cannot

imagine why they would take such a path and sell the drugs before having them approved,

but I am certain of one thing, us humans tend to be weak and go with the side of lust, greed,

and power. This is seen all the time with powerful people; the hunger for power is what got

them there in the first place, but it becomes a problem when they are willing to break the

rules in order to gain more.

In this case we are talking about powerful and influential people such as Martha

Stewart, who is widely known and has much power as a businesswoman and ImClone

founder, Samuel D. Waksal. Who instead of taking action towards the illegal trading done

in ImClone and ending their own habits, preferred to expand it by involving people outside

of the company such as family and friends. Because of this I believe the only way all of the

illegal trading could have been prevented would be by letting go of all those people in

power who were involved.

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References

Frohlich, C., Shoup, C., & Fretz, R. (2004). THE EFFECT OF THE KEY PERSON AND

MARKET EFFICIENCY: THE MARTHA STEWART OMNIMEDIA CASE.

Journal Of Accounting & Finance Research, 12(5), 62-73.

Johnson, C.E. (2012). Organizational Ethics: A Practical Approach (2nd ed.). Los Angeles,

CA: SAGE.

Mandell, D. (2012). Tangled Webs. Florida Bar Journal, 86(4), 42.

(n.d.). Retrieved from http://www.washingtonpost.com/wp-dyn/articles/A33838-

2004Mar5.html