On December 27, 2001, media mogul and celebrity homemaker Martha Stewart sold her stake in the biotech company ImClone. Two days later, the company's stock dropped 16 percent when the Food and Drug Administration said it had rejected the ImClone's main drug, Erbitux, for cancer treatment. Stewart had owned 4,000 shares of ImClone. By selling just before the FDA's announcement, she avoided losses of $45,673, a tiny fraction of her net worth.To accuse her of insider trading, the government would have to show Stewart traded while in possession of information that was nonpublic and material - something that is not widely known and that a regular investor would consider important in making a decision about a trade.Stewart and the company's CEO shared the same broker at Merrill Lynch, Peter Bacanovic. Although neither Bacanovic nor his assistant, Doug Faneuil, knew about the Erbitux decision, both knew that the CEO was trying to dump his stock and they warned Stewart about it.Stewart was sentenced to five months in prison, plus five months of house arrest and two years of probation for lying, obstruction of justice and conspiracy. Without admitting or denying the accusations, Stewart settled with the SEC in 2006, agreeing to pay a fine of $195,000 (four times the amount she had avoided in losses on ImClone's stock, plus interest) and stepping down as director of her company for five years. Bacanovic also settled, paying a little more than $75,000 in penalties.It could have been a lot worse.Consider this case and other examples of alleged insider trading or other corporate malfeasance related to corporate securities from news stories.Discuss why this is relevant in a module about IPOs.