Waksal Indicted on More Charges
A federal grand jury in New York on Wednesday indicted the high-rolling founder and former chief executive of ImClone Systems Inc., Samuel D. Waksal, on charges of bank fraud and obstruction of justice, the latest in a series of crackdowns on alleged corporate wrongdoers.
The 13-count indictment expands the case against Waksal, who in June was charged with perjury and securities fraud, and brings more unwanted attention to Waksal’s friend Martha Stewart, who also has been caught up in the scandal.
The additional charges also stiffen Waksal’s potential penalty; if convicted on the bank fraud charge alone, Waksal would face up to 30 years in prison.
Prosecutors had sought to negotiate a plea deal with Waksal before a Friday deadline to indict him. A deal probably would have required him to reveal, in exchange for leniency, whether he provided insider tips to family and friends, including Stewart.
“This is a painful chapter in Dr. Waksal’s life,” Mark Pomerantz, an attorney for Waksal, said in a statement. “Like all Americans, he is presumed to be innocent, and he will respond to these charges as required.”
Waksal’s troubles began late last year, when the Food and Drug Administration declined to approve Erbitux, which the company had touted as a breakthrough cancer-fighting drug. Prosecutors allege that Waksal learned of the pending decision and warned family and friends--including Stewart--to sell off ImClone shares before the market pummeled the company’s stock. Stewart denies getting inside information.
Wednesday’s indictment adds allegations of wrongdoing that go back years before the Erbitux debacle. The bank fraud count alleges that Waksal defrauded Bank of America from April 1999 to January, using forged documents to obtain $44 million in loans on ImClone stock he no longer owned.
The new charges also allege that Waksal took elaborate steps to cover up his misdeeds, including plotting with family members to lie to investigators about their reasons for the Dec. 27 stock sale.
Prosecutors also accuse Waksal of ordering the destruction of ImClone computer files, phone messages and records of his offshore accounts at banks in Switzerland and the Netherlands. They say the files and records could have revealed the identities of his insider trading partners and where he may have hidden illicit gains.
Prosecutors say Waksal’s daughter, Aliza, made $2.5 million on her Dec. 27 sale of ImClone stock. Waksal, a flamboyant staple of the East Coast party circuit and celebrity gossip columns, allegedly had tried to sell his shares but was thwarted by brokerage firms that refused to process the orders.
Investigators also are investigating Stewart, founder and CEO of Martha Stewart Living Omnimedia Inc., after learning that she disposed of nearly 4,000 ImClone shares, also on Dec. 27, grossing about $230,000.
Stewart and Aliza Waksal employ the same Merrill Lynch broker, Peter Bacanovic. Congressional investigators probing the ImClone insider scandal are exploring whether Bacanovic could have tipped Stewart.
Stewart has said she had a standing order to sell her ImClone stock if it fell below $60. Bacanovic’s assistant, Douglas Faneuil, originally said there was such an order but has since changed his account.
On Tuesday, the House Energy and Commerce Committee, which is investigating the ImClone trading scandal, said it requested additional documents from Stewart--including e-mails and records from her business manager.
In a letter to Stewart’s lawyer, the committee chairman, Rep. W.J. “Billy” Tauzin (R-La.), and Rep. James C. Greenwood (R-Pa.), chairman of the subcommittee on oversight and investigations, requested an interview with Stewart to clear up discrepancies between her account of the sale and that of her broker and his assistant.
Shares of Martha Stewart Living Omnimedia slumped Wednesday after reports that Congress is widening its probe into Martha Stewart’s sale of ImClone stock in December.
The company’s shares fell 8.2%, or 67 cents, to close at $7.50 on the New York Stock Exchange. The stock has taken a beating since news broke in early June that Stewart’s name was linked to the ImClone insider trading scandal.
The New York Times and the Wall Street Journal reported this week that Faneuil told investigators that Bacanovic ordered him to call Stewart to advise her to sell her shares because Waksal and members of his family were dumping theirs.
