ImClone Systems’ board members admitted to Congress on Thursday that they knew their flashy chief executive had a long string of troubles, including forging the signature of a company lawyer yet did not oust him until shortly before government investigators arrested him on charges of illegal inside trading.
Samuel Waksal resigned under pressure from the board on May 22. At the time, he was under investigation by the government for allegedly trying to sell his ImClone shares after learning in December that the Food and Drug Administration was likely to refuse a marketing application for the firm’s colon cancer drug. Others have been caught up in the ImClone scandal, including style maven and Waksal friend Martha Stewart, who has not been charged and says she has done nothing wrong.
Directors and current CEO Harlan Waksal, Samuel’s brother, were grilled by a House Energy and Commerce subcommittee. The hearing comes as corporate boards face rising criticism for failing to curtail executive salaries and exorbitant perks. Committee members learned:
Board members knew in February that Samuel Waksal had forged the signature of ImClone lawyer John Landes when Waksal sought a loan from Bank of America. The board hired a law firm to investigate.
Two weeks ago, board members learned that Waksal had forged Landes’ signature in 1986 on a stock certificate. Landes learned of the forgery in 1991 but said Thursday that the forgery resulted from Waksal not understanding how to sell shares, prompting Rep. Jim Greenwood, R-Pa., to reply: ”My children know better than that.”
In 1998, the board issued rules forbidding Waksal from billing ImClone for five-star hotels or spending more than $100 per bottle of wine.
Board members knew for years that Waksal had trouble paying off his credit cards — and granted him loans of up to $367,000 to help him cover his debts. Waksal repaid ImClone for the loans.
Rep. Diana DeGette, D-Colo., asked why given the forgeries, the credit card problems, the allegations of insider tipping the board did not fire Waksal sooner. Board member Paul Kopperl said the board considered in January whether to keep Waksal as CEO. But calling Waksal a visionary, Kopperl said, ”We felt he was largely indispensable.”