Professor Bainbridge...on law, politics, religion, culture & food

More Martha

With respect to my post the other day about Martha Stewart's indictment, an astute reader emails to ask whether I'm talking about the "infamous Count 9 of the criminal complaint instead of to the overall obstruction charges that form the basis for the rest of the complaint"? I'm only talking about count 9. I agree with the reader's assessment of that count. He writes:

If you were thinking only of Count 9's charge that by publicly proclaiming her innocence, she was engaging in criminal securities fraud, I agree with you. In fact, even if she is, indeed, guilty, something bothers me if the government is allowed to publicly make allegations against her but she is not allowed to publicly deny them.

Meanwhile, Tung Yin of the Yin Blog has a very interesting post providing a good deal of detail on the legal merits of the obstruction of justice charge. I don't dispute his assessment that what Martha did could be criminal (in a hyper-technical sense, IMHO), but I still don't get why it is criminal as a matter of sound public policy or, especially, why as a prudential matter a prosectutor should have brought Count 9. I agree entirely with the first reader's assessment that it is unfair to let the government fling allegations, which they end up deciding not to charge somebody with, and then let the government prosecute that person for having denied the allegations the government decided it couldn't prove. Why isn't that just whacked?

Turning to the obstruction counts, however, I'm also skeptical of them as a prudential matter. It also seems to me that aggressive prosecutorial use of 18 U.S.C. sec. 1001 undercuts the requirement that the government prove guilt beyond a reasonable doubt. Granted the 5th amendment only gives you a right to remain silent, but shouldn't you be allowed to tell the cops "I didn't do it" without getting hauled up on charges later -- especially if they end up deciding not to charge you with the underlying crime? I mean, I can't tell you the number of times I've told a cop I didn't see the stop sign. [Ed: After reading Prof. Yin's helpful follow-up post, I added the underlined sentence for further clarification.]

I should note that Prof. Yin, to say the least, seems receptive to the prudential component of my argument:

Now, all that's left is to wonder, should the alleged lie in the actual case with the actual circumstances be a crime? And if so, is it really worth prosecuting? That's a totally different question, and certainly I can see arguments to be made that Stewart's alleged false statement really isn't worth the government's attention and time -- but for her celebrity status.

Exactly, if the defendant wasn't Martha Stewart (and if we hadn't already had Enron and so on), this case never happens. My friend Tom Smith makes this point quite pithily:

Steve Bainbridge is right on about Martha Stewart. He is perhaps too polite to add, however, that the ill-defined insider trading laws are perfect tools for ambitious prosecutors who want to go on scalp-hunting expeditions. Is Martha the most egregious insider trader in Manhattan these days? Hardly. But she is a high profile celeb with a reportedly obnoxious personality that the press would love to see fall. The Bonfire of the Vanities with the feds roasting their marshmellows on the flames.

Harsh, but true. (Download my overview of insider trading law here.)