- The Washington Times - Thursday, June 13, 2002

NEW YORK (AP) The former CEO of ImClone Systems Inc. was arraigned yesterday on charges of conspiracy to commit securities fraud for purportedly tipping off two persons to sell the biotech company's stock the day before federal regulators rejected its application for a cancer drug.

FBI agents arrested Samuel Waksal at his home at 6:30 a.m., said Mr. Waksal's spokesman, Scott Tagliarino. Justice Department spokesman Bryan Sierra confirmed the arrest. Securities regulators also brought a civil case against Mr. Waksal yesterday.

According to the complaint unsealed yesterday, Mr. Waksal is accused of tipping off an unidentified person in Florida to sell 50,000 shares of ImClone stock on Dec. 27, a day before the Food and Drug Administration (FDA) told the company it would not consider its application for Erbitux, a much touted cancer drug. Mr. Waksal also is charged with purportedly tipping off a second person that same day who later sold nearly 40,000 shares.

Mr. Waksal, who was replaced as CEO by his brother, Harlan, on May 22, is also charged with perjury in statements to the Securities and Exchange Commission (SEC) about conversations he had with the persons who received the tips.

At a court appearance yesterday, U.S. Magistrate Judge Frank Maas released Samuel Waksal on a $10 million bond, on the condition that $5 million of it be turned over in cash. Under an agreement with prosecutors, Harlan Waksal cosigned the bond.

Judge Maas also ordered the former CEO to identify any money held overseas and return it to the United States by tomorrow.

Samuel Waksal, who was not required to enter a plea at the proceeding, did not speak to reporters as he exited the court. His next court date was set for July 12.

According to the SEC, unspecified Waksal family members sold more than $10 million of ImClone stock over a two-day period.

A source familiar with the case, speaking to the Associated Press on the condition of anonymity, said Samuel Waksal is accused of tipping off his father and daughter, Aliza, who sold $2.5 million worth of stock. They have not been accused of wrongdoing by prosecutors.

Mark Pomerantz, Mr. Waksal's attorney, called the prosecution's evidence "entirely circumstantial. The government misread that evidence, and it overreacted in deciding to make today's arrest."

Mr. Waksal's friend, Martha Stewart, the domestic-lifestyle businesswoman, shed her remaining stake of 3,000 shares on Dec. 27. Her spokesman had said Miss Stewart received no inside information on ImClone.

ImClone's fortunes are entirely dependent on Erbitux, an experimental cancer drug that initially garnered the company widespread praise and enthusiastic investors who drove up the stock price. The shares have plummeted by 90 percent since December because of the FDA decision and because of the investigations into possible insider trading.

ImClone stock closed up 30 cents to $7.85 yesterday on the Nasdaq Stock Market.

In addition to the criminal charges, the SEC filed insider-trading charges yesterday against Samuel Waksal, saying that he learned of the Erbitux rejection on Dec. 26. In a civil lawsuit filed in federal court in Manhattan, the SEC said he gave the negative information to family members, who sold ImClone stock before it became public, and that he tried to sell 79,797 shares worth nearly $5 million before the information became public.

It said Samuel Waksal was unable to sell because two brokerage firms wouldn't execute his order.

The SEC wants him to be required to pay back "several million dollars" in losses it says were avoided by the family members he tipped. The commission also is seeking a civil fine against him and an order barring him from serving as an officer or director of any publicly traded company.

A subcommittee of the House Committee on Energy and Commerce is looking at ImClone and whether the FDA's secretive approval process for new drugs makes it easier to manipulate stocks.

Ken Johnson, a spokesman for the committee, said that based on the federal complaint, it appears that Samuel Waksal lied to congressional investigators. Mr. Johnson said the panel expected the former CEO to appear as scheduled today, unless he was in jail.

"We are giving him the chance to set the record straight under oath," Mr. Johnson said.

Samuel Waksal was subpoenaed by the committee last week. As of yesterday, his lawyers were still deciding whether he would invoke his Fifth Amendment right to avoid self-incrimination.


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