Yes, there's a difference. Prosecutors brought charges that they knew they shouldn't because what they FIRST alleged was not illegal. Then, when she defended herself by claiming she was innocent, they brought more charges against her for simply doing that. Uh, why are some giving these monsters a walk? They didn't know the law? No, they knew what they were doing. It's arguable, even self-evident, that she didn't. And so she lied to liars. The only difference is, their resources are unlimited, including the ability to kill her if she ignores them. That was her mistake in this trade. And that of her hired hands. The risk reward with those odds was atrocious. She should have gotten out of the trade immediately. To bring it to trial was one of the stupidest things I've ever seen so savvy a person ever do. It is the stuff of Greek tragedies.
rgelite, I'm a Libertarian and probably have similar beliefs to yours in general, but insider trading is breach of contract. Stockholders (and especially company founders) gain tremendous benefits from public equity markets - liquidity and easy access to capital among them. To get a rough idea of just how much those benefits are worth: what would Martha's net worth be if she hadn't been able to take her company public? In exchange for such benefits, stockholders (and especially company founders) agree to play by certain rules, including the rules that regulate insider trading. I don't see those rules as any different than the ones which mandate minimum accounting standards. They are contractual agreements that support public equity markets. If you don't want to play by those rules, don't take your company public, and stay out of the stock market. One can easily envision a society with a different set of rules, and one might well consider such a society "freer" - but I suspect that their equity markets would be quite a bit less healthy. Don't you think the entrepreneurs of Galt's Gulch would opt for honesty with their investors as a matter of principle? That's the principle which stands against insider trading. Sam Waksal put his daughter and father before all of his other investors when he tipped them off to sell their shares - an understandable favoritism, but if you're the officer and major shareholder of a public company you've agreed to treat all your investors equally. Guilty. Now that I have (hopefully) defended the ethical underpinnings of insider trading laws: was Martha guilty of insider trading? Not in my opinion. Guilty of obstructing a legitimate investigation into someone else's (Waksal) insider trading case? Yes, in my opinion. I agree with you about the "tall poppy" syndrome.
From Wycoff's 1910 Book "Studies in Tape Reading": "Of course the break in Gas, which finally touched 138, was due to the Supreme Court decision, announced on the news tickers at 1:10pm, but, as is usually the case, the tape told the news many minutes before anything else. This is one of the advantages of getting your news from the first place where it is reflected. Other people who wait for such information to sift through telephone and telegraph wires... are working under a tremendous handicap."
Diode, While I'm not a Libertarian, I see we have many commonalities in our approach to thinking. Yes, residents of Galt's Gulch would undoubtedly base their agreements on a respect for reality, as I understand "Atlas Shrugged." Not honesty, but reality. Here's the difference. Holding "honesty" (as the best policy) above all else is an intrinsic principle which can often drop context IF that's the sole basis for deciding what to assert. And it is never moral, imo, to choose to do or say anything that destroys one's values, including oneself. Consider the honest father who opens the front door of his house, confronts an axe wielding maniac who asks, "Where are the children?!" to which dad replies, "Oh, up the stairs, second door on the right." He's an "honest" guy in the traditional understanding of the word. Context is THE essential in judging whether lying is dishonest because only context provides the framework for what is real. Grandpa and grandma at the front door asking dad the same question provides an entirely different context. And outcome. There are mechanisms in the market in which all of us can detect when a corporate officer is buying/selling shares. For whatever reason. I've never been a big "do as I say and not as I do" fella so I'd manage my investments accordingly. That's enough for me, particularly when I've made the decision to tie myself financially as a "second hander" to this other guy's success. I will do my part, which is small, to simply keep an eye on him. I'm not under any illusions that I'm actually funding his operation when I buy my few thousand shares some time after his IPO. What the officers of Enron and WorldCom did were barbaric. But I don't blame Waksal for trying to save his own life, and those of his family, when the FDA screwed with him over Erbitux. We all seem to think everyone's a lawyer these days. The guy sounded a lot like Hank Rearden to me, Diode. A dork, a geek, a scientist, an innovator, a lot like Martha. Almost an idiot savant in ways, so beyond everyone in certain areas, so clueless in others. Here's the best article I could find that sums up the position I support in as succinct a way I've ever read: http://capmag.com/article.asp?ID=2895 I cite it to save us both time. Everyone's, in fact. And this one goes into more detail into who the real monsters are. Here's an excerpt: "If anyone deserves to be put on trial today -- to be cuffed, "perp-walked," indicted, convicted, and incarcerated -- it is the regulators, those dictators who routinely violate property rights and destroy wealth (and careers) in the process. These are the witch-hunters of the 21st Century, the politicians and bureaucrats who make up "laws" against producers -- and loyal family men -- like Sam Waksal. These witch-hunters are the real perpetrators, against which real evidence can be amassed and real justice can be done. Will true justice be served? It's unlikely. The underlying philosophical ideas that pervade American culture must change for the better. " And the full article: http://capmag.com/article.asp?id=2130 Enjoy!
"Insider trading" should not be considered a crime because there is no violation of rights in a voluntary trade or exchange of information between individuals, where no force or fraud are involved. Waksal violated no one's rights and initiated no force. Waksal simply told his father and daughter that an upcoming FDA ruling would likely decrease the value of their stock. Waksal's family then sold to avoid the imminent losses. But they committed no crime. They sold to willing buyers and, like any other traders in the stock market, didn't promise or give guarantees that the value of the shares they sold would not fall." [capitalism magazine] Insider trading should be illegal for 2 reasons. Firstly, it inhibits the capitalistic system from working. Karl Marx argued against capitalism because he believed owners are mere parasites who don't add value and screw the workers: they pay workers $1 to produce a good that fetches $2. Workers are not being paid their full value added. Of course, it is obvious to us that this argument is faulty because owners and entrepreneurs do add value: #1 they have ideas #2 they take on risk, they put their money, time and reputation on the line But if insider trading is deemed legal, where is the risk for the entrepreneur? Let the joker take his company public and create instant wealth for himself: b/c any company brought public will be assigned a market cap which is a multiple of its earnings and liquidation value) If there is any hint that the company might go down, let him cash out at any time to the unsuspecting public. This is analogous to being given a free call option that's already in the money: you can cash out now for a profit or you can hold with no downside risk and unlimited upside. Secondly, there is actually a violation of rights. True, there is no force involved, but there is fraud. I hesitate to bring up this example because I might be accused of exploiting the example to conjure up emotions. Nevertheless, I believe this comparison is valid to some extent. Insider trading is wrong for the same reason that sex with a minor is wrong. You can argue that "the minor was willing and not forced in any way to participate in the act" but we know full well that most (if not all) minors are not equipped to make decisions of this magnitude. It is almost certain they will be hurt. So to protect minors, we create statutory rape laws. With insider trading, of course the buyer on the other side willing engaged in the transaction. The problem is that prior to the transaction, the seller knows almost for certain that the buyer will be hurt. So we protect the buyer by creating insider trading laws. Some might argue: "But what if you have a trading edge? Isn't that like insider trading? You are going to profit off of what you know, and what the other side doesn't know." The thing is, even if you have an edge, you are not guaranteed to profit. That's why we calculate risk/reward ratios. There is always that uncertainty. And that's why we don't outlaw sex between consulting adults before marriage. True, there's still a chance the girl will get hurt, but there's no way to tell in which situations that will happen. Thoughts?
My thoughts, off the cuff (I'm here way too late now): 1. If a "joker" (your term) takes a company public, that portion of the public who buy into it without vetting (establishing he's in fact a joker) deserve what they get. Right? 2. I disagree with your definition of fraud in this case, that since one person "knows" more than another, he's immoral if he acts on that knowledge. The fact is, had Waksal been left alone by the thugs in the government, he'd have been a net loser anyway, since by the FDA's own capricious and arbitrary behavior it soon thereafter (and it seemed quickly) approved Erbitux. [Aside, and like you NOT to insert an emotional component into this, but I want to mention that a very close friend of mine died of colon cancer last year. LAST YEAR. Do you understand?] It seems even by your definition that Sam wasn't quite that "in the know" after all; he should have held onto his damn stock! Of course, it's a cinch to say that NOW. My point being, I don't subscribe to your definition because there is rarely, if ever, a guarantee in buying/selling stock as to the future price. In our profession we know this. People who dabble in our profession do so at their own risk. And I'm no paragon. I've made plenty of dumb ass moves and I will again. In this instance, it is sufficient for me to know, with existing disclosure laws, that the company insiders are selling. The fact is, there will always be smarter and stupider people than you and me. We will each take into a transaction what we know, what we imagine, what we hope for; and we alone decide for ourselves if we can enter the trade or not. The rest are sheep and deserve to be sheared. The analogy about children (minors) is not one I found to be on point; they do not have the critical faculties developed yet. Most adults do if they want to take the time to develop them. Sadly, most don't and instead play stocks as a lottery (the geniuses in 1999) or trust others to do it, then complain when they aren't perfect. In my opinion, your argument confuses fact with method. By age 21 (give or take depending on the person), people that had an honest inclination to learn how to think rationally (identify facts, derive conclusions logically) have the tools they need to choose their investments in all areas of life--money, career, love. That there are no guarantees, or because some people get their facts wrong, or make a mistake in method from time to time, is no reason to throw someone else in jail who is also trying to protect his or her own interests, same as everyone else. Again, I draw the line between those who lied deliberately (as you cited for fraud, I agree) and the Waksals and Stewarts of the world who simply reacted, without pretending otherwise, to save themselves and their loved ones. I won't argue their utter stupidity in light of current legislation and culture; as I said, they appear to me to be idiot savants in many respects. 3. And speaking to self-interest, altruism is the philosophy that says "the greatest good is that which enriches the doer the least (I. Kant)." Unfortunately, such a malicious code of behavior only guarantees that good people are sacrificed to trash (as seen in the latest craze, that insipid passion movie). Buying into that view of morality leads to sacrificing producers to looters, the providers to the needy, those who use intelligence to the ignorant, those who can to those who cannot. Obviously I don't subscribe to that despicable world view, thus my conclusions about moral action are decidedly different than, say, a devout and literal Christian's would be. I find most so-called altruists, in fact, are not. They are, instead, little petty monsters who are looking after what's important to them, and in doing so acting selfishly, but masquerading under the cloth (or whip) of "doing for others." Except they always want to "do for others" with my resources. Case in point, the left's claim that "health care is a right." To the contrary, Rights delimit what we already have, not what we are to be given; they assert what no one can take from us. Rights determine boundaries, NOT obligations to do, but obligations on how we must be left alone and unfettered by others. To claim health care as a "right" is to say that those who need health care have the moral (and if they code it into law, the legal) authority to enslave those who can provide it--doctors and other similar professionals. I was under the impression that Article 13 of the U.S. Bill of Rights outlawed involuntary servitude. Why? Because health care doesn't grow on trees. Someone has to learn it and provide it. And they are free (in my world) to set whatever price they think they can get for their effort. Naturally, I encourage competition to keep my costs low. I'm a Capitalist. The principle is identical, imo. It is immoral in my view to codify laws that sacrifice the Waksals of this world to those of us who aren't his peers and could never create something like Erbitux. We, through our own devices and as best we individually can, must determine for ourselves if our investments are worthy of our intellect or if we're looking for a free ride. If the latter (as part of the free ride crowd) then I contend it is they who are the real frauds, not the insider trying to protect his own life in panic to get out of the way of a runaway train called the federal government which routinely creates and destroys hundreds of millions of dollars, wrecks whole industries, rewards patronage, and commits other atrocities based on its whim of the year and prosecuted by ambitious political whores and their paid thugs. It is my responsibility as an investor to protect my wealth by keeping an eye on things as best I can. But there are no guarantees, except in the eyes of soccer moms who would have all of us stay at home with warning labels on everything from ladders to water glasses. So to answer your last question: we're adults, not children. And to answer your first: the risk for the real entrepreneur is in being the entrepreneur. And NOT the joker. But neither a safety-obsessed soccer mom, nor the eager lawmakers pandering to her, nor those lawmakers' ambitious thugs could understand that fact in a million years. Never have. Never will.