Lawmakers Fault ImClone DirectorsOct 11, 2002 | AP Lawmakers are lashing out at officers and directors of ImClone for not quickly firing former CEO Sam Waksal, who allegedly forged a company lawyer's signature to get millions of dollars in loans.
Waksal was indicted in August for allegedly telling family members to dump millions of dollars worth of stock before bad news about ImClone Systems Inc.'s colon cancer drug, Erbitux, hit the markets.
He has pleaded innocent. Waksal was not present at a hearing Thursday by the House Energy and Commerce Committee, but he was the target of lawmakers' scorn for allegedly taking millions of dollars in loans from ImClone and abusing shareholders' trust.
Dozens of lawsuits and tax liens reportedly have been filed against Waksal by the Internal Revenue Service, New York state, banks, art galleries and individuals.
"I'm stunned," Rep. Diana DeGette, D-Colo., told several ImClone officials appearing before the committee, which is investigating possible illegal insider trading of ImClone stock.
John Landes, ImClone's senior vice president for legal affairs, testified that Waksal forged Landes' signature in January on a letter pledging ImClone securities as collateral for loans from Bank of America.
Landes acknowledged that he did not notify authorities after Waksal admitted the alleged forgery to him.
Waksal did not resign until May, when the company learned that federal charges were going to be filed.
The testimony also brought to light an earlier alleged forgery by Waksal, on a stock certificate in 1986.
Landes said he learned of that deception in 1991 but did not take action because he considered it to be "a good-faith misunderstanding" on Waksal's part.
Rep. Jim Greenwood, R-Pa., chairman of the committee's investigative panel, also asked why Waksal wasn't fired immediately. Greenwood asked the directors whether they had asked themselves, "Is this guy worthy of our trust?"
The federal indictment against Waksal includes charges of forgery and defrauding Bank of America by pledging ImClone securities that Waksal no longer owned.
His attorney, Mark Pomerantz, didn't return a telephone call seeking comment.
The committee released documents showing that officers and directors of New York-based ImClone Systems Inc. sold some $70.3 million of their company stock in December, the month in which it plunged on news that the government would not review ImClone's application for Erbitux.
An e-mail written by Thomas Gallagher, an ImClone patent attorney, indicated that senior company officials were aware that the Erbitux application was in trouble long before the Food and Drug Administration's official notice.
Gallagher wrote that on Dec. 18, ImClone lawyer Catherine Vaczy "informed me that select members of senior management have been aware that the FDA may not accept our (filing). This information became known to them sometime last week."
Harlan Waksal, Sam Waksal's brother and ImClone's current CEO, did appear at the hearing and testified: "We have turned a new page. ... We have made progress on a number of fronts."
ImClone has put in place new measures to tighten internal controls, made management changes and is proceeding with clinical development of Erbitux, Waksal said.
"We now understand that ImClone directors and officers reaped millions from the sale of ImClone stock before FDA's refusal-to-file letter," said Rep. Billy Tauzin, R-La., the committee's chairman. "Cancer patients, of course, got their hopes dashed."
Harlan Waksal insisted that no one at the company traded on confidential information.
The Justice Department is investigating sales of ImClone stock. An assistant at Merrill Lynch to Peter Bacanovic, the broker for domestic design entrepreneur Martha Stewart, pleaded guilty this month to a misdemeanor charge of taking a payoff to keep quiet about Stewart's sale of 4,000 ImClone shares. As part of his plea, Douglas Faneuil agreed to testify against Stewart who is a friend of Sam Waksal and others who might be charged in connection with the scandal.
The House committee has asked the Justice Department to pursue a criminal investigation into whether Stewart knowingly lied to lawmakers about her stock sale. She has denied any wrongdoing and has said she had a standing order with Bacanovic to sell the ImClone shares if they fell below $60.