By Lorraine Woellert
Months of made-for-media congressional hearings have produced some gripping TV drama in this post-Enron age. Not since 1994, when Big Tobacco's top execs stood shoulder to shoulder before a Capitol Hill panel and swore to tell the truth, the whole truth, and nothing but the truth, has Congress had such a bag full of CEOs to grill. Bernie Ebbers, Ken Lay, Jeff Skilling, John Sidgemore -- all have been hunted down and hauled up to Capitol Hill, where they've sweated under the lights while taking a verbal flogging from lawmakers.
Yet, on Sept. 10, House Energy & Commerce Committee Chairman W.J. "Billy" Tauzin (R-La.) took a pass on his biggest celebrity CEO yet -- Martha Stewart, the millionaire doyenne of domesticity. Instead of tackling the Queen of Tarts on his own, Tauzin punted to the Justice Dept., where prosecutors can decide what to do next.
Right call, Mr. Chairman. In recent months, Tauzin & Co. has become so wrapped up in the frenzy of issuing subpeonas, leaking incriminating documents, and making headlines that the panel has lost sight of its true mission. Sure, most Hill members are lawyers, but prosecutors they aren't. Their job is to write the nation's laws and keep tabs on the executive and judicial branches. Alas, they're also politicians, and for a while Martha-mania proved irresistible.
Stewart's troubles began this spring, when committee investigators looking into the collapse of ImClone Systems share prices came across a stock sale by Stewart that allowed her to unload her ImClone shares in late December, before the stock's value sank. Investigators questioned whether Stewart acted on inside info that the Food & Drug Administration was about to deny an approval on ImClone's experimental cancer drug, Erbitux. ImClone's then-CEO, Samuel Waksal, a close Stewart friend, has since been indicted on insider-trading charges.
As etiquette, and her lawyers, would dictate, Stewart has been a model of quiet discretion since. Her only remarks -- a terse "no comment" -- came on a morning TV talk show over the summer while she was chopping cabbage with a large knife.
It was an unforgettable scene and has been reshown on TV over and over again. She wouldn't answer such rude questions. Why should she? A congressional hearing is the worst place to determine anyone's guilt or innocence. "The purpose of hearings is to gather information that might be useful for future legislation. That doesn't require a celebrity," says Roger Pilon, director of constitutional studies at the libertarian CATO Institute. "Hearings involving celebrities like Martha Stewart tend to be showboating exercises for members of Congress, who seem never to miss an opportunity to appear before the TV camera."
Fortunately for the thousands of workers and investors victimized by corporate greed, cooler heads prevailed in Stewart's case. The committee already is looking into possible wrongdoing at 14 corporations, including Enron, Rite Aid, Qwest Communications, WorldCom, Global Crossing, Waste Management, Kmart, Sunbeam, and Xerox. All these investigations might turn up serious institutional problems that require complex legal fixes. "I don't know that we need any extra legislation in the area of insider trading," Pilon quips.
With all that work on its plate, "the resources of the committee are overwhelmingly being focused on one individual, which by all appearances seems to be an insider-trading case," lamented Representative Peter Deutsch (D-Fla.), ranking minority member of the committee's oversight and investigations panel. Adds Representative Diana L. DeGette (D-Colo.): "Congress has many more pressing issues it should be focusing on than whether one individual made $227,000 in an insider trading deal."
Tauzin's team might have handed Justice enough evidence to charge Stewart with lying to Congress, insider trading, or serving a shiraz with sea bass. But that's for experienced prosecutors to decide, and after that, for a judge or a jury to make a full and balanced determination. Stewart could still find herself following a long line of people -- from mob bosses in the '50s to Watergate figures to Oliver North in the Iran-contra scandal -- who learned the hard way that it's not wise to get Congress mad at you during high-profile investigations.
But in the case of Martha-mania, Congress came too close to overstepping its bounds. Lawmakers are better off chalking this up as a lesson learned.
Woellert covers Congress from BusinessWeek's Washington bureau
Edited by Douglas Harbrecht