The Ostrich Defense
Is this a problem, officer?”—she might have avoided jail
time. However, because she tried to destroy evidence, she
demonstrated an understanding that she broke the law and
a willingness to lie to maintain her innocence, the legal
system was obliged to give her a stronger penalty. So, for
Martha Stewart, maintaining a position of willful ignorance
might have saved her from some culpability.
I’m not a legal expert and I certainly can’t go back to time
to ask to Martha Stewart and get her to change her strategy,
so I can’t test my professor’s theory. In the, admittedly
hypothetical, scenario in which Martha fesses up to the
insider trading immediately, why might she avoid some of
guilt of her action? I might argue that a LOT of common
law depends on the role assumed. In other words, what
would a typical member of the community do, presuming
an prudent standard of understanding and care. After all,
who would have expected a domestic maven like Martha
Stewart to know the intricacies of securities law? Certainly,
Martha Stewart is less liable for these actions compared to her
NASD registered stock-broker: securities professionals are
supposed to know better. Martha Stewart never put herself
forward as an expert in legal or investment requirements. By
contrast, if Martha Stewart started out patently horrendous
recipes in her magazine, she would be subject to greater
criticism than an amateur chefs, since she has put herself
forward as an expert in the field.
In other words, the role you adopt helps to determine
your responsibility. If you have accept a role with greater
responsibility, like a stock-broker, you must maintain the
higher standard, act according to the law, and accept higher
penalties for failures.
Most importantly, once you’ve accepted a role with more
responsibility, you can no longer maintain ignorance as a
defense.
Therefore, we have a final question: do your plan fiduciaries
understand the responsibilities they accepted by adopting
that role? Logically, once a fiduciary has accepted that title,
they have a duty to understand what they are now responsible
for. In other words, they can no longer stick your head in
the sand and pretend that they are safe from responsibility
by claiming ignorance. n
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