The Real Lesson of the Martha Stewart Case

After over two years of struggle, Martha Stewart’s legal odyssey is about to end. Today, she got 5 months in prison and 5 months of house arrests for charges arising out of her sale of nearly 4,000 shares of ImClone stock in December 2001.

Whatever one thinks of the doyenne of domesticity, her case holds important lessons. Not about the arrogance of the rich or the dangers of being a powerful woman in America. Instead, the Stewart case is a cautionary tale about the ever-expanding power of federal prosecutors.

James Comey, the federal prosecutor behind the Stewart case, says he went after Stewart “not because of who she is but because of what she did.” But that’s hard to believe given the audacious legal theory Comey used to pursue her.

Comey didn’t charge Stewart with insider trading. Instead, he claimed that Stewart’s public protestations of innocence were designed to prop up the stock price of her own company, Martha Stewart Living Omnimedia, and thus constituted securities fraud. Stewart was also charged with making false statements to federal officials investigating the insider trading charge-a charge they never pursued. In essence, Stewart was prosecuted for “having misled people by denying having committed a crime with which she was not charged,” as Cato Institute Senior Fellow Alan Reynolds put it.

Nor was this the first time Comey contemplated taking down a high-profile defendant with a novel legal theory. In mid-2003, Comey considered prosecuting fabulist Jayson Blair for the hitherto unknown crime of making stuff up in the New York Times. Blair, the Times reporter who faked stories and quotes, became the subject of scandal in early 2003 when the Times unearthed his deception. In May of that year Comey’s office sought information from the Times as a prelude to prosecution, possibly for mail fraud.

But Comey — who has since been promoted to the No.2 slot in the Justice Department — is hardly alone in his willingness to make a federal case out of almost anything. The problem is systemic, driven by legislators who are all too willing to turn every social problem into a matter for the criminal law.

In a famous speech in 1940, Attorney General Robert Jackson (later Justice Jackson) warned federal prosecutors: “With the law books filled with a great assortment of crimes, a prosecutor stands a fair chance of finding at least a technical violation of some act on the part of almost anyone.” The great danger, said Jackson, is that “he will pick people that he thinks he should get, rather than pick cases that need to be prosecuted.”

Since Jackson gave that speech, that “great assortment of crimes” has expanded radically. Today, there are over 4,000 federal crimes spread throughout tens of thousands of pages of the U.S. Code, an increase of one-third since 1980. And the law sweeps far more broadly than it did in Jackson’s day. Today it’s possible to send a person to jail without showing criminal intent or even a culpable act-as Edward Hanousek discovered when the Supreme Court denied his appeal in 2000. A federal district judge sentenced Hanousek, a roadmaster for a railroad company in Alaska, to six months in prison after a backhoe operator working under Hanousek accidentally ruptured an oil pipeline, spraying a harmful quantity of oil into the Skagway River. Though he was off duty and away from the site when the accident occurred, Hanousek was convicted of unlawful discharge under the Clean Water Act by reason of negligent failure to supervise. In dissenting from the Court’s refusal to hear the case, Justices Thomas and O’Connor warned of exposing “countless numbers of construction workers and contractors to heightened criminal liability for using ordinary devices to engage in normal industrial operations.”

Martha Stewart is hardly the only American to feel the full weight of the federal government come down on her for an offense that merits a civil penalty at worst. For years, as Harvard Law Professor William Stuntz warns, we’ve been constructing “a world in which the law on the books makes everyone a felon, and in which prosecutors and police both define the law on the street and decide who has violated it.”

In that world, the ordinary citizen can fall as easily as can the rich and famous.