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ImClone's Waksal to Be Sentenced

He faces a stiff fine and up to seven years in prison for insider trading and tax evasion.

June 09, 2003|From Reuters

NEW YORK — Samuel D. Waksal, founder of biotech company ImClone Systems Inc., is due to be sentenced Tuesday for insider trading and may become the highest-ranking executive in the recent spate of corporate scandals to receive a prison term.

Waksal, who resigned in May 2002 as chairman and chief executive of ImClone, faces a stiff fine and up to seven years in prison under federal sentencing guidelines for his role in insider trading and evading taxes on $15 million of artwork.

U.S. District Judge William Pauley is scheduled to sentence Waksal, who pleaded guilty in October to six of 13 counts involving his efforts to sell a huge block of his company's stock in late 2001. In March, he pleaded guilty to two separate counts related to the art.

The attempt to sell the shares took place just before ImClone shares tumbled on the news that the Food and Drug Administration rejected the company's application to sell an experimental cancer drug.

Martha Stewart, the prominent media and home design executive, also has become entangled in the insider-trading scandal. Stewart, a close friend of Waksal's, was indicted last week on charges of conspiracy, obstruction of justice and making false statement to federal agents. She pleaded not guilty.

Sentencing will cap a stunning fall for the 55-year-old Waksal.

From a state dinner at the White House to tennis games with corporate raider Carl Icahn and lavish parties with guests such as rock music star Mick Jagger, Waksal became a society fixture as he built ImClone into a hot biotech company.

ImClone, started by Waksal and his younger brother Harlan in 1984 in an old shoe factory in lower Manhattan, shot to prominence as it developed what Samuel Waksal once called "one of the biggest drugs in the history of oncology."

Excitement over the drug, Erbitux, drove a run-up in ImClone's stock price until late 2001, when the fortunes of Waksal and ImClone soured.

On Dec. 26, 2001, Waksal received a tip from his brother, then the company's chief operating officer, that the FDA would reject ImClone's Erbitux application. According to prosecutors, Waksal tried to sell a large block of company stock before the rejection was made public.

Last week, ImClone said it would resubmit its application for Erbitux in the second half of the year after favorable clinical trials. Its stock is now trading about $40 a share, well off its 52-week low of $5.24 and at a level unseen since shortly after the scandal broke in December 2001.

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