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Lawmakers To Query ImClone CEO

Oct 10, 2002 | AP

Lawmakers investigating possible insider trading of ImClone stock are asking the biotech company's chief executive about a decision to buy shredders around the time a federal inquiry was beginning.

The House Energy and Commerce Committee released documents Wednesday showing that officers and directors of ImClone Systems Inc. sold some $70.3 million of their company stock in December, the month in which it plunged on news the government would not review ImClone's application for its colon cancer drug, Erbitux.

"If all of those people really believed that Erbitux was the next miracle drug, then why were they selling stock instead of buying it?" asked Ken Johnson, a spokesman for committee chairman Rep. Billy Tauzin, R-La.

But Andrew Merrill, a spokesman for the New York City-based ImClone, said, "We have no reason to believe that any employees traded on material, nonpublic information."

The committee also made public a Dec. 18 e-mail written by Thomas Gallagher, an ImClone patent attorney, that indicates 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 he was told "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."

Gallagher couldn't be reached for comment Wednesday night.

Harlan Waksal, ImClone's chief executive officer, and other company officers and directors have agreed to testify at a hearing Thursday by the House committee, Merrill said.

Waksal will be asked about a decision to buy two paper shredders in early January, around the time the Securities and Exchange Commission (news - web sites) began an investigation of ImClone, Johnson said.

The company has told the panel that a shredder for Waksal was ordered by his assistant, with Waksal playing no role in the decision other than "signing a routine purchase order, the contents of which he did not review."

ImClone also said Waksal had not shredded or ordered the shredding of any documents sought by federal investigators.

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 and others who might be charged in connection with the scandal.

The House committee has asked the Justice Department to begin 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.

Stewart is a friend of ImClone co-founder and former CEO Sam Waksal, Harlan's brother, who was indicted in August for allegedly telling family members to dump millions of dollars worth of stock before the bad news about Erbitux hit the markets. He has pleaded innocent.

Also scheduled to testify Thursday were ImClone board chairman Robert Goldhammer, and directors Paul Kopperl and John Mendelsohn, president of the M.D. Anderson Cancer Center, who also was a director of now-bankrupt Enron Corp.

"Sam Waksal was not the only one at the helm," said Rep. Jim Greenwood, R-Pa., chairman of the panel's investigative subcommittee. "Clearly ImClone's directors and officers have a lot to answer for as well."

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