business news in context, analysis with attitude

The Wall Street Journal reports that the enforcement staff of the US Securities and Exchange Commission will recommend filing civil securities fraud charges against Martha Stewart.

The charges concern what the staff believes was Stewart’s trading in insider information when she sold her ImClone Systems stock late last year.

These charges could be just the beginning of legal problems for Stewart. The style maven and CEO of Martha Stewart Living Omnimedia is also being investigated by the US Department of Justice for the stock sale.

Former ImClone CEO Samuel Waksal already has pleaded guilty to some insider trading charges.
KC's View:
We could make jokes about “blue light specials on hacksaws and prison garb,” but it’d be too easy.

And we’d never go for the easy joke…

There has been rampant speculation that the fortunes of Kmart and Stewart were inextricably tied, that for both to survive their troubles long-term, they each had to get past their short-term difficulties. We’re not sure we entirely believe that; after all, Stewart didn’t use insider information to sell her any Kmart stock she might have owned. (At least, we don’t know anything about it…)

Kmart is faced with a tough decision. It’s not as cut-and-dried as one might think, because there will still be legions of folks out there who believe that Stewart is getting a raw deal from the government, or that she’s just being targeted because she’s a successful woman. It’s entirely possible the brand could survive a prison term or a major fine (and we’re betting she only gets hit with the latter).

In fact, if we had to bet, we’d guess that Stewart’s business still has a better chance of surviving than Kmart’s…