In defense of Martha: It's certainly been a fun game to bash Martha Stewart over her alleged insider trading w/r/t ImClone. Of course the bashing really has more to do with her personality (as perceived) and her near-monopoly over decorating the homes and minds of the middle class. She's a success story that people love to tear down. I'm sure I've taken my share of pot-shots at her.

Comes now "Reason" with its eloquent and legally persuasive defense of Martha and the federal charges. The whole thing is worth a read, but here's just a particularly persuasive snippet:

The most serious criminal charge against her is not perjury or insider trading but securities fraud, based on the fact that she denied to the press, personally and through her lawyers, that she had engaged in insider trading. This was done, the feds say, not for the purpose of clearing her name, but only to prop up the stock price of her own publicly traded company, Martha Stewart Living Omnimedia. In other words, her crime is claiming to be innocent of a crime with which she was never charged.

As for the SEC’s civil case, it hinges on an elastic understanding of insider trading, an offense Congress has never defined. The justification for the ban on insider trading, which makes little economic or legal sense, is just as murky as the behavior covered by it. Given the difficulty of figuring out exactly what constitutes insider trading (let alone why it’s illegal), it is entirely possible that Stewart and her lawyers weren’t sure whether she had broken the rules. In any event, under existing case law, it’s clear that she didn’t.

The remainder of the article goes on to question the foundation of insider trading laws and whether they actually help achieve market efficiency. I'm not quite ready to say they don't, but you decide for yourself.