Learn From Martha (Editorial)

Martha Stewart’s recent conviction caused us to once again look at the corporate scandals that are partly to blame for an economy that is still trying to regain its footing.

One needs a scorecard these days to keep track of the various companies and officials in trouble.

There’s Enron Corp., WorldCom Inc., Adelphia Communications Corp., Tyco Corp., HealthSouth Corp., Qwest Communications International Inc., Credit Suisse First Boston, the various mutual companies with their mounting scandals, and, of course, Stewart.

Some have pleaded guilty to various charges. Some have maintained their innocence. Stewart has been convicted and, as hard as it is to imagine, may well spend time in prison. Still ahead for style-setter Stewart is the Securities and Exchange Commission’s civil insider trading case.

Of all those charged and facing jail time, Stewart already has lost the most and stands to lose much more. In an effort to save about $51,000 on some 4,000 shares of ImClone stock, Stewart has lost between $400 million and $700 million. She has had to resign as chairman and CEO of her company and from the board, and there’s a good chance the company she headed may go under. Jail time will make it virtually impossible to ever regain what she has lost.

A recent Newsweek article said federal prosecutors offered Stewart a deal last April “to cop to one count of making a false statement.” The article, citing sources close to the case, said “she would have received probation and could continue working at her company. But she refused to plead guilty to a felony.”

The article went on to say that “she could have avoided the entire mess if she had confessed in the beginning. Had she admitted wrong doing in early 2002, she could have gotten off with a $200,000 fine and no jail time.”

Who knows why Stewart and her lawyers allowed her criminal case to go to trial? Did they think the facts of the case — a fabulously wealthy and successful businesswoman took advantage of her situation and bent the rules in order to save a tiny fraction of her annual income at the expense of rank-and-file investors — would play well before a jury?

What’s difficult to grasp is that her big loss — and that of the stockholders in her company — could have been avoided if she had simply been willing to say, “I made a mistake.”

All of us in business can all learn from this.