- The Washington Times - Thursday, August 8, 2002

NEW YORK (AP) A federal grand jury has indicted ImClone Systems Inc. founder and former chief executive officer Samuel Waksal in an insider trading scandal that has tarnished Martha Stewart and her home-fashion empire.
The indictment, unsealed yesterday in federal court in Manhattan, brings new charges of obstruction of justice and bank fraud against Mr. Waksal in addition to previous securities fraud and perjury charges.
The bank fraud count which carries a maximum prison sentence of 30 years says Mr. Waksal defrauded Bank of America between April 1999 and January by securing $44 million in loans with ImClone stock he no longer owned.
In June, Mr. Waksal a friend of Mrs. Stewart's was arrested on insider-trading charges for possibly tipping off members of his family to sell ImClone shares. Mr. Waksal's attorneys and prosecutors had been trying to negotiate a plea deal before a deadline to indict him.
Attorneys for Mr. Waksal did not immediately return telephone calls seeking comment yesterday.
The filing of a formal indictment indicates plea talks with Mr. Waksal have broken down. A plea deal likely would have required him to reveal whether he warned family and friends, including Mrs. Stewart, of problems in winning federal approval of ImClone's cancer-fighting drug.
Prosecutors accused Mr. Waksal of secretly advising his daughter, Aliza, and father, Jack, to sell Dec. 27 after learning that his biotech company's effort to win approval for a highly touted cancer drug had been rejected by the Food and Drug Administration. The daughter's stock sale netted her $2.5 million. Mr. Waksal had tried to sell his shares, but brokerage firms refused to process the order.
Investigators also targeted Mrs. Stewart, CEO of Martha Stewart Living Omnimedia Inc., after learning that she disposed of nearly 4,000 shares Dec. 27, netting about $230,000. Mrs. Stewart and Aliza Waksal share the same Merrill Lynch broker, Peter Bacanovic. Congressional investigators probing the ImClone-insider scandal are exploring whether Mr. Bacanovic could have tipped off Mrs. Stewart.
The home-lifestyle maven maintains she had an order to sell her stock when it dropped below $60. But doubt has been cast on that assertion because she and Mr. Bacanovic differ on when the order was placed.
Meanwhile, shares of Martha Stewart Living Omnimedia Inc. slumped yesterday after reports that Congress is widening its probe into her sale of ImClone stock. Shares fell 8.2 percent, or 67 cents a share, to close at $7.50 on the New York Stock Exchange.
On Tuesday, the House Energy and Commerce Committee said it is requesting additional documents from Mrs. Stewart including e-mail and records from her business manager.
In a letter to Mrs. Stewart's attorney, the committee chairman, Rep. Billy Tauzin, Louisiana Republican, and Rep. James D. Greenwood, Pennsylvania Republican, chairman of the oversight and investigations subcommittee, requested an interview with Mrs. Stewart to clear up discrepancies between her account of the sale and that of her broker and his assistant.
Mr. Bacanovic's assistant, Douglas Faneuil, originally said there was such an order but has since changed his story.
The New York Times and Wall Street Journal reported this week that Mr. Faneuil told investigators that Mr. Bacanovic ordered him to call Mrs. Stewart to advise her to sell her shares because Mr. Waksal and members of his family were dumping their shares.

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