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Former ImClone CEO Indicted on Insider Trading Charges

BY Admin  August 8, 2002 at 6:00 PM EST

The grand jury indicted Waksal, 54, on 13 counts including two counts of conspiracy to commit securities fraud and wire fraud, seven counts of securities fraud, one count of conspiracy to commit perjury and to obstruct justice.

The indictments also include one count of perjury, one count of obstruction of justice and one count of bank fraud. The bank fraud count alone could carry up to 30 years in prison.

Waksal is accused of defrauding Bank of America by using ImClone securities that he no longer owned in order to secure his bank loans. He allegedly forged the signature of ImClone’s general counsel on a fabricated document in order to convince Bank of America that the securities were still in his possession.

The indictment also alleged that Waksal attempted to obstruct an SEC investigation into insider trading of ImClone shares.

Waksal also tried to sell shares of ImClone’s newly developed cancer drug Erbitux, despite allegedly having prior knowledge that the FDA would not approve the drug.

Waksal allegedly received a tip on Dec. 26 from his brother Harlan – now ImClone’s chief executive – about the FDA rejection. He is accused of then attempting to sell 79,797 shares and passing the information on to his father and daughter.

ImClone stock plummeted after the FDA announced their rejection of the cancer drug.

Waksal worked with federal prosecutors for several weeks to strike a plea deal and avoid indictment.

Homemaking celebrity Martha Stewart, a friend of Waksal’s, is also under federal investigation after selling almost 4,000 ImClone shares the day before the FDA made its announcement rejecting Erbitux.

While no criminal charges have been filed against Stewart, she is being sued privately by shareholders in her company, Martha Stewart Living OmniMedia.

The case is among a spate of scandals that have enervated investor confidence in corporate America and contributed to Wall Street’s bear market.