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ImClone Founder Waksal Admits Illegal Trading

Oct 16, 2002 | USA Today

ImClone Systems founder Sam Waksal pleaded guilty to charges of inside trading and conspiracy Tuesday, but prosecutors warned a broader case against the executive and those he tipped may be looming.

Waksal did not implicate close friend Martha Stewart, who is being investigated for selling almost 4,000 shares of ImClone for $228,000 a day before bad news about the company's cancer-fighting drug became public.

Stewart has denied wrongdoing, and her spokeswoman did not return calls for comment Tuesday.

Appearing in federal district court here, the 55-year-old Waksal became the first former CEO to plead guilty in this year's rash of corporate scandals, admitting to six of 13 counts stemming from large sales of ImClone stock in December ahead of news that the Food and Drug Administration would reject its application for approval of cancer drug Erbitux.

Waksal admitted he urged his father and daughter to dump ImClone shares but said he never told them the reason, which legal analysts say could shield them from inside-trading charges.

Prosecutors said during the hearing that their probe has expanded to include the sale of $30 million more in ImClone stock based on possible confidential information, plus $600,000 ''by a close friend of Dr. Waksal.'' Waksal may face new charges, they said.

The $30 million sell-off is believed to be related to a prominent overseas investor, people close to the investigation say.

''I deeply regret what has happened. I was wrong,'' Waksal said after the hearing. ''I regret more than anything else having involved my daughter Aliza, who did nothing wrong and has suffered so much as a result of my actions.''

His plea was unusual because he made no agreement to cooperate with prosecutors, making it likely that they will seek a heavy sentence. He faces up to 65 years in prison and millions of dollars in fines. But his plea could minimize his family's legal woes.

Assistant U.S. Attorney Michael Schachter said Waksal used family members as ''human shields'' to lie for him in a Securities and Exchange Commission investigation. Waksal will be sentenced after U.S. District Judge William Pauley reviews a probation report.

Shares in Martha Stewart Living Omnimedia rose 79 cents to $7.13 Tuesday. ImClone shares gained 34 cents to $7.70.

Douglas Faneuil, the assistant to Stewart's broker at Merrill Lynch, pleaded guilty this month to a misdemeanor, admitting he lied to authorities about her sale of ImClone stock. He is cooperating with prosecutors.

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