In July 2003 Samuel Waksal, the founder of ImClone Systems Inc., began a seven-year prison term. In December 2001 Waksal received word that the Federal Drug Admini- station (FDA) was about to issue a negative report on ImClone’s cancer drug Erbitux. Although this knowledge was material information, and Waksal was an insider, he sold some of his ImClone shares and disclosed the information to his daughter, advising her to sell her ImClone shares. Martha Stewart, celebrity and chief executive of Martha Stew- art Living Omnimedia, had once been a stockbroker and served on the board of direc- tors of the New York Stock Exchange. She was also a friend of Samuel Waksal. A day before the FDA made its negative announcement about Erbitux, Martha Stewart sold 3,928 shares of ImClone stock at a price of about $60. In an interview with The New Yorker author Jeffrey Toobin, she indicated that the sale constituted about 0.03 percent of her assets.43 On June 4, 2002, Martha Stewart was indicted and charged with nine counts of fraud, perjury, and obstruction of justice. In her defense she claimed that she had an informal stock loss order arrangement with her broker, at a price of $60. In March 2004 a jury found her guilty on all counts, and she served a prison term as a result. By design, the products and services sold by Martha Stewart Living Omnimedia are strongly identified with Martha Stewart the person. In this respect the personal actions of Martha Stewart affected the financial performance of Martha Stewart Living Omnimedia. On August 11, 2003, Martha Stewart Living Omnimedia announced that its quarterly earn- ings per share had fallen to 2 cents, from 14 cents the year before. An article that appeared in the June 16, 2003, issue of the Chicago Sun-Times asked the following question: “Why did this woman who already possesses enormous wealth and the devotion of countless numbers of fans put it all at risk to avoid taking a piddling loss on a single stock?” Martha Stewart was not actually charged with insider trading but with having lied to prosecu- tors about it when interviewed by them. Therefore, instead of being culpable for a civil offense (her trade) and a fine, she left herself open to being found guilty of a criminal offense, which brought with it the risk of prison time. Discuss any behavioral phenomena that might have played a role in the behavior of Samuel Waksal and Martha Stewart.