Answered Essay: Apply the fraud triangle to the Martha Stewart case and identify the system flaws. Specifically, you should apply the

Apply the fraud triangle to the Martha Stewart case and identify the system flaws. Specifically, you should apply the fraud triangle to analyze how and why existing processes failed. Be sure to answer the following questions: What personal or professional pressures might have contributed to the breakdown in ethics? How might existing processes have allowed for opportunities to behave illegally and/or unethically? What rationalizations might have led those responsible for the improper behavior to believe that what they were doing was justified?

Expert Answer

Fraud Triangle is a model which is designed to explain the reasoning behind an employee’s decision to commit fraud at the workplace. The three components of fraud triangle are – Opportunity, pressure and rationalization.

Fraud triangle can be applied to Martha Stewart’s case as well.

  • Firstly, she is in a special position (she is the chairwomen and chief executive) and had the opportunity for a fraud to be perpetrated.
  • Secondly, she has an incentive and is under pressure, which give her a reason to commit fraud.
  • Lastly, her attitude and ethical values allowed her to rationalize her dishonest act.

Stewart sold 4,000 shares of ImClone stock, with a tip from her her broker Peter Bacanovic. She sold her shares, a day before the Food and Drug Administration refused to review ImClone System’s cancer drug Erbitux. Stewart lost more than a quarter of her net worth of $650 million, and avoided a loss of $45,673 by selling off those shares. According to her portfolio record in December, 2001, she had more losses than gains, and ImClone was one of few companies has positive gains.

It looked like Stewart might be desperate about the loss and the incentive she had in hand to avoid the loss, she sold off the shares under pressure. However, Stewart could not save herself, and was found guilty not because of her sale of ImClone Stock, but on her public statement of innocence and obstruction of justice.

Stewart had claimed publicly that she sold her stock because of a prearranged sell order. This was found to be false later on. Stewart had made these statements with an intention to deceive purchasers of her company’s stock by increasing the price of the stock. Being a successful business woman, Stewart knew what she was doing was absolutely wrong, but she could not resist lying to protect her image and the image of her company.

Opportunities are the circumstances that will make a person weak to the scenario. Because, opportunities are those that allow a person to take a bold step of carry out the fraudulent actions. Being a CEO of ImClone, Stewart had the opportunity and the position to get certain confidential information from inside. There are records of phone conversations which between the Stewart and Baconovic which indicate that Bacanovic called Martha Stewart’s office on December 27 shortly after Samuel Waksal’s daughter dumped all her shares. Stewart’s stock was sold ten minutes later. This shows that they had a communication and together committed the fraud. They are closely associated and hold a certain position in the organization that gave them the opportunity to access nonpublic information, which they ultimately used it for personal well being and advantage.

Rationalization is the final part of fraud triangle. It is said to be a frame of mind or an ethical character that allows a person to justify his/her dishonest actions. Stewart is a first time offenders with no criminal record as such. Hence she does not view herself as a criminal. Therefore, she tried to rationalize their fraudulent actions with certain reasons which is related to her personal enrichment, paying personal debts, and protecting the company. When Stewart sold her shares and lied about the insider information, she felt her actions were okay because she was protecting her own financial assets and her company.

Buy Essay
Calculate your paper price
Pages (550 words)
Approximate price: -

Help Me Write My Essay - Reasons:

Best Online Essay Writing Service

We strive to give our customers the best online essay writing experience. We Make sure essays are submitted on time and all the instructions are followed.

Our Writers are Experienced and Professional

Our essay writing service is founded on professional writers who are on stand by to help you any time.

Free Revision Fo all Essays

Sometimes you may require our writers to add on a point to make your essay as customised as possible, we will give you unlimited times to do this. And we will do it for free.

Timely Essay(s)

We understand the frustrations that comes with late essays and our writers are extra careful to not violate this term. Our support team is always engauging our writers to help you have your essay ahead of time.

Customised Essays &100% Confidential

Our Online writing Service has zero torelance for plagiarised papers. We have plagiarism checking tool that generate plagiarism reports just to make sure you are satisfied.

24/7 Customer Support

Our agents are ready to help you around the clock. Please feel free to reach out and enquire about anything.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.


Let us write that nagging essay.


Submit Your Essay/Homework Instructions

By clicking on the "PLACE ORDER" button, tell us your requires. Be precise for an accurate customised essay. You may also upload any reading materials where applicable.


Pick A & Writer

Our ordering form will provide you with a list of writers and their feedbacks. At step 2, its time select a writer. Our online agents are on stand by to help you just in case.


Editing (OUR PART)

At this stage, our editor will go through your essay and make sure your writer did meet all the instructions.


Receive your Paper

After Editing, your paper will be sent to you via email.

× How can I help you?