- The Washington Times - Tuesday, June 10, 2003

NEW YORK - ImClone Systems founder Sam Waksal was sentenced yesterday to seven years and three months in prison for an insider-trading scandal that ensnared his family and threatens Martha Stewart and her home-decorating empire. He also was ordered to pay more than $4 million in fines and back taxes.

U.S. District Judge William H. Pauley rejected Waksal’s plea for a lighter sentence based on ImClone’s cancer research, Waksal’s humanitarian works and the intense media interest surrounding the case.

“The harm that you wrought is truly incalculable,” the judge said.

Earlier, Waksal apologized in court to his family and former employees, his voice breaking.

“I am deeply disturbed and so very sorry for my actions,” he said. “I want to apologize to all the people who may have had confidence in me and whose confidence I betrayed.”

The judge ordered Waksal to report to federal prison July 2. Until then, he must remain in his Manhattan apartment — except for appointments with his attorneys — and submit to electronic monitoring.

After the sentence was handed down, Waksal hugged his brother and his 80-year-old father in the courtroom.

Waksal, who once rubbed shoulders with rock stars and cut a flamboyant figure in the mostly staid pharmaceutical industry, pleaded guilty in October to six counts, including securities fraud, bank fraud, conspiracy to obstruct justice and perjury. The charges cover insider trading and the evasion of $1.2 million in sales taxes on purchases of fine art.

Assistant U.S. Attorney Michael Schachter asked for more than seven years, saying Waksal “told numerous, separate and distinct sets of lies” surrounding his family’s sale of ImClone stock. Waksal faced up to 75 years in prison; federal sentencing guidelines call for six to seven years.

Waksal admitted to a scheme in which he tipped his daughter, Aliza, to dump ImClone stock just before it plunged in value on news that the Food and Drug Administration would not review the company’s experimental cancer drug, Erbitux.

Mrs. Stewart, a close friend of Waksal, was indicted last week on five federal counts — including obstruction of justice, conspiracy and lying to investigators — tied to her December 2001 sale of nearly 4,000 shares of the company’s stock. She pleaded not guilty to all the charges.

Her former stockbroker, Peter Bacanovic, also was indicted and pleaded not guilty. Prosecutors said Mr. Bacanovic illegally sent word to Mrs. Stewart that Waksal’s family was planning to unload shares of ImClone.

In a packed courtroom and with dozens of cameras ringing the Manhattan courthouse, Waksal attorney Mark Pomerantz tried to distance his client from the recent scandals that have shaken confidence in corporate America.

“He has been worried that he’s going to be held responsible for companies and situations that he had nothing to do with,” Mr. Pomerantz said.

But Mr. Schachter said Waksal had violated “a sacred trust with his shareholders” and blamed him for doing national harm with a crime made worse by his position as chief executive officer.

“It runs the risk of sending the message to investors that the game is rigged,” he said of Waksal’s actions.

A week ago, ImClone stock surged after European researchers reported that Erbitux does appear to be effective, helping some of the sickest colon cancer patients live longer.

“The past few weeks should have been a moment of glory for Sam Waksal. But there’s no glory for Sam Waksal,” Mr. Pomerantz told the judge.

Waksal told the judge, “To cancer patients, I am so sorry for any delay I might have effected in the approval of Erbitux because of my actions.”

Mr. Pomerantz portrayed Waksal as fiercely devoted to ImClone and said he covered up the insider trading because he did not want to have to leave the company.

The lawyer said the insider trading “took place literally on the spur of the moment.”

“This was not a sophisticated, highly planned course of conduct that extends over time,” he said.

Waksal, in a letter to the court, said: “I tore my family apart. That punishment is with me every moment of the day. I dream about it.”

Mr. Pomerantz submitted 120 letters of support for Waksal to the judge, saying they showed that his client was a caring, dedicated leader.

The charges against him were not all directly related to insider trading.

In pleading guilty to bank fraud, Waksal said he forged a lawyer’s signature on paperwork for a $44 million bank loan. On the obstruction count, Waksal admitted he ordered staff to keep certain financial records from leaving his office, knowing the Securities and Exchange Commission would be interested in them.

Prosecutors say Waksal also ordered the destruction of computer files, phone messages and other records, though he did not admit to those accusations. He pleaded guilty to conspiring with an art dealer to dodge $1.2 million in sales tax on nine paintings that cost him a total of $15 million.

In March, Waksal agreed to an $800,000 fine and a lifetime ban on leading a public company in a partial settlement of civil charges relating to the scandal.

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