- The Washington Times - Friday, October 10, 2003

NEW YORK (AP) — Government regulators brought civil charges of insider trading against the father of former drug-company executive Sam Waksal yesterday, saying he sold more than $8 million worth of stock based on a tip from his son.

The charges against Jack Waksal, 82, were made in a lawsuit filed in U.S. District Court in Manhattan, where Sam Waksal pleaded guilty a year ago to securities fraud for tipping his daughter to dump ImClone Systems Inc. stock just before a negative government report was issued.

The SEC also seeks in court papers to force Sam Waksal’s sister, Patti Waksal, to give back profits from 1,336 Imclone shares that the SEC said her father sold improperly for her. The SEC did not accuse her of violating securities laws.

Reached by telephone at his East Hampton residence, Jack Waksal said he had not heard of the charge. The government said Mr. Waksal also has a residence in Hallandale, Fla.

“Sorry, I cannot talk now,” he said, declining comment.

His attorney, Charles Stillman, issued a statement: “We will respond in due course to the civil action by the SEC for money damages.”

Sam Waksal, co-founder and former chief executive of ImClone, is serving a sentence of seven years and three months at the Schuylkill Federal Correctional Institution in eastern Pennsylvania.

In court papers, the SEC said Sam Waksal tipped his father after learning privately on Dec. 26, 2001, that the U.S. Food and Drug Administration would issue a negative report on ImClone’s cancer drug, Erbitux.

The SEC said Waksal told his father of the impending FDA announcement, prompting Jack Waksal to sell more than 110,000 shares of ImClone stock for more than $8 million on Dec. 27-28, 2001. It said he engaged in insider trading again when he sold the stock owned by Patti Waksal, 47, of Bethesda, Md.

The FDA report, when made public, caused the value of the company’s stock to plummet.

The SEC said Jack Waksal later provided false and misleading explanations for his trades and falsely testified about the events of Dec. 26 through Dec. 28 when the SEC questioned him.

The ImClone Systems case eventually ensnared Waksal family friend and lifestyle maven Martha Stewart, who goes to trial Jan. 12 on charges she ordered her stockbroker to sell ImClone because she heard the Waksals were planning to sell their shares.

Her company, Martha Stewart Living Omnimedia Inc., has been battered by the scandal surrounding Mrs. Stewart’s indictment on charges of obstruction of justice regarding her sale of ImClone Systems stock in December 2001.

Martha Stewart Living magazine is cutting its guaranteed circulation by 22 percent in the latest sign of how severely its founder’s legal woes are hurting the business.

Beginning next year, the magazine will cut its rate base, the amount of circulation guaranteed to advertisers, from 2.3 million to 1.8 million, Suzanne Sobel, the executive vice president for ad sales, said yesterday.

The company reported an 86 percent drop in second-quarter profits in August as the impact of Mrs. Stewart’s case came to bear. Advertising pages and circulation revenue both fell at the company’s flagship magazine.

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