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ImClone Officials Ordered Shredders

Request Came One Day Before SEC Sought Data

Sep 14, 2002 | The Washington Post

Samuel and Harlan Waksal, the two brothers who ran ImClone Systems Inc., ordered shredders for the company's executive offices the day before the Securities and Exchange Commission requested corporate records in January, according to documents turned over to a congressional panel yesterday.

The documents, obtained by The Washington Post, do not show when the shredders arrived or whether the brothers shredded material requested by federal or congressional investigators. In a letter to the House Committee on Energy and Commerce, Harlan Waksal, who is now ImClone's chief executive, said it was "not clear" whether his brother had destroyed relevant material but implied that he had not done so himself.

The information sheds new light on the climate at ImClone in January, as the New York biotechnology company was beset by questions about its cancer drug, Erbitux, which the Food and Drug Administration had rejected a few days earlier.

Investigators had previously said they suspected Samuel Waksal of ordering that computer files be deleted and of shredding documents in an attempt to disguise improper activities, including insider stock trading.

Samuel Waksal, formerly chief executive, left the company in May and was subsequently indicted on charges of insider trading. His younger brother, Harlan Waksal, succeeded him and has not been charged with a crime. The company has sued Samuel Waksal since his indictment, saying he breached his duty to shareholders by destroying the records.

A source with knowledge of the case said an SEC attorney left a phone message for Samuel Waksal on Thursday, Jan. 3. The following Monday, Jan. 7, the documents show, a Waksal aide sent an e-mail to another aide that read: "Sam needs a paper shredder. He wants it for his office." An aide for Harlan Waksal added an addendum later that day: "Can you please order 2. Tnx."

The next day, Jan. 8, the company received an "informal request" for records from the SEC, documents show. The company did not get its first subpoena from the Justice Department until Jan. 24, sources said.

In a letter to House investigators, ImClone attorneys said Harlan Waksal signed a purchase order for the shredders without paying attention to its content. The letter said the shredders were eventually placed in Samuel Waksal's office and in a conference room near Harlan Waksal's office.

The company already had a large shredder, but it was located away from the two executives' offices, said sources with ties to the company. These sources said the new shredders did not arrive until Jan. 22, more than two weeks after the SEC request.

People close to ImClone, speaking on the condition of anonymity, said there were legitimate reasons the company may have wanted to buy shredders in early January. The company was generating a flood of paper as it attempted to deal with the crisis in investor confidence that followed the FDA's rejection of Erbitux on Dec. 28, they said. "There were multiple drafts of talking points, press releases and that sort of thing being generated," said one person close to the company. "Obviously, you don't want the prior 10 drafts of those floating around."

Andrew Merrill, a spokesman for ImClone, confirmed that the company had submitted new documents and letters to Congress, but he would not comment further.

The Commerce Committee held one hearing this summer on the Erbitux disaster; Samuel Waksal invoked his Fifth Amendment right against self-incrimination and refused to testify. Harlan Waksal testified at length.

"We're deeply disturbed that Harlan Waksal would sign a purchase order for the shredders given the circumstances. Clearly, he has a lot of explaining to do," said committee spokesman Ken Johnson.

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