ImClone Systems founder Sam Waksal pleaded guilty this morning to bank fraud and conspiracy in an insider trading scandal.
Waksalâ€™s admission is the second guilty plea in the investigation of insider trading on ImClone stock, a scandal that threatens his pal Martha Stewart and her home design empire.
Waksal entered a plea today to six counts, including securities fraud, bank fraud, conspiracy to obstruct justice, and perjury.
Waksal, 55, was arrested in June for allegedly trying to dump nearly $5 million in ImClone stock after learning the Food and Drug Administration had rejected his license for the cancer drug Erbitux.
Prosecutors said that during a two-day period beginning on Dec. 26, 2001, Waksal tried to sell off 79,797 shares of ImClone stock valued at $4.9 million. He failed when no broker would sell the stocks, prosecutors said.
Prosecutors also charge that he tipped off his daughter and father, telling them to dump their ImClone stock before the price plummeted after the FDA decision was made public. Jack Waksal sold off stocks valued at $8.2 million and daughter Alisa unloaded $2.4 million in shares.
â€œI am aware that my conduct, while I was in possession of material non-public information, was wrong,â€� Waksal said today as he stood in U.S. District Court in Manhattan.
The plea did little to end Waksalâ€™s woes.
Prosecutors say they are still investigating a sale of 600,000 share of ImClone stock by a close friend of Waksal that began Dec. 26 and ended Dec. 28, as well as Waksalâ€™s sale of more than 30 million shares.
Prosecutor Michael Schachter said Waksal appeared to be trying to shield his father, a Holocaust survivor, and daughter Alisa. More charges are possible, he noted.
â€œHe used family members as a human shield to lie to the SEC, to protect them as well as himself,â€� said Schachter. â€œSam Waksal as the CEO of ImClone betrayed the trust of his shareholders.â€�
The bank fraud charge, which brings the most severe penalty with up to 30 years in prison, stemmed from Waksal forging the name of ImCloneâ€™s top lawyer to a document securing a line of credit.
â€œRather than have the Imclone general counsel sign the letter, I signed the letter,â€� he told the judge.
The former CEO claimed that though he forged the signature, he did not knowingly use the letter to obtain two separate loans.
Schachter said it seemed as though Waksal was not accepting responsibility for his actions, even though he admitted committing perjury and getting others commit perjury. As a result, government officials intend to ask for harsher punishment.
Waksal faces up to 65 years in prison and millions in fines when sentencing takes place Jan. 24, Judge William Pauley said.
The plea was not made in exchange for a predetermined sentence agreement with prosecutors an unusual move in a criminal plea.
Waksal said it has been a very sad and difficult time for him and his family. â€œMy daughter had noting to do with this,â€� he added.
Yet the former CEO admitted that he called his daughter while she was vacationing in Idaho to warn her about the situation and tell her to sell her shares to pay for an apartment.
The case has been the subject of high media attention because Waksal’s friend, Martha Stewart, also sold off about $228,000 worth of stock before word of the FDA decision was made public.
Two weeks ago, her stockbroker’s assistant, Douglas Faneuil, pleaded guilty to conspiracy and securities fraud and agreed to cooperate with prosecutors in the case.
In court at his pleading, Faneuil said Stewart had been tipped off about the FDA’s decision before it became public, and he admitted he had been offered money and a week’s paid vacation not to disclose that fact.