Sam Waksal pleaded guilty Tuesday to several charges related to insider trading, while prosecutors warned they may bring more charges against the former chief executive of ImClone Systems.
Speaking outside the Manhattan federal court after an hourlong hearing, Waksal expressed regret about what has happened. “This has been a difficult and sad time for me, my family and my friends,” he said. “I have made terrible mistakes. I was wrong.”
Prosecutors are investigating the possible sale of $600,000 of ImClone stock by a friend of Waksal on Dec. 28. Government lawyers are also probing a sale of $30 million in ImClone shares sold by an associate on Dec. 28, said a spokesman for the U.S. attorney’s office for the Southern District of New York.
The former CEO pleaded guilty to six counts, including securities fraud, conspiracy to obstruct justice, perjury and bank fraud. Waksal admitted that he lied to the Securities and Exchange Commission during its investigation of the ImClone stock sale, tried to sell shares of the biotech company, and directed another individual to destroy documents or delete computer files, court papers said.
Waksal previously had pleaded not guilty to the charges.
However, the ImClone founder did not plead guilty to charges that he informed other persons — identified as “tippee No.1” and “tippee No.2” in court papers that they should sell their ImClone shares.
In court Tuesday, Waksal admitted telling his daughter Aliza to sell her shares but didn’t tell her why. Waksal allegedly also told his father, Jack Waksal, to sell his shares.
The seven charges still facing Waksal include conspiracy to commit fraud in connection with the purchase and sale of securities, as well as five counts of securities fraud for the sale of ImClone shares at various accounts.
He was arrested in June for allegedly trying on Dec. 26 to sell ImClone shares after discovering that the Food and Drug Administration was set to reject the company’s application covering its cancer drug, Erbitux, court documents said.
Waksal allegedly informed some friends and family members of the FDA’s decision.
“I regret more than anything else having involved my daughter, Aliza, who did nothing wrong and has suffered so much as a result of my actions,” Waksal said Tuesday.
Waksal faces a maximum of 65 years prison time, the U.S. attorney’s office spokesman said. Judge William Pauley is overseeing the case.
The ImClone insider-trading scandal has also engulfed domesticity diva Martha Stewart, a friend of Sam Waksal’s who unloaded ImClone shares the day before the FDA decision was announced.
Stewart is currently under investigation for the sale but has repeatedly denied any wrongdoing. She has not been charged.
However, the controversy has pressured the price of shares of Martha Stewart Living Omnimedia, sparking a congressional investigation, and Stewart recently resigned her seat on the New York Stock Exchange’s board of directors.
Stewart claims that she had put in a stop/loss order with Peter Bacanovic, a Merrill Lynch stockbroker who also counted Waksal as a client, to sell her shares if the stock dropped below $60.
Douglas Faneuil, a Merrill trading assistant, initially backed the story of the stop/loss order but later recanted.
Earlier this month, Faneuil agreed to plead guilty to a misdemeanor charge for accepting money or other valuables and for not informing investigators regarding inside information allegedly given to Stewart.
Some have speculated that Waksal’s guilty plea to certain charges, combined with Faneuil’s, raises the pressure on Stewart.
However, any effect on Stewart is unclear, said Ira Sorkin, a former assistant U.S. attorney in New York and a former director of the New York office of the Securities and Exchange Commission.
“It depends on what Waksal has to say and if he decides to cooperate,” Sorkin said. “We don’t know if he even spoke to her.”
Waksal declined in his statements outside the courthouse Tuesday to answer questions from reporters on whether he had tipped off Stewart.
“Sam Waksal’s guilty plea has nothing to do with Martha Stewart,” attorneys for Stewart said in a statement.
No agreement with prosecutors
Though Waksal agreed to plead guilty Tuesday, the case against the former ImClone CEO is not resolved and government attorneys could still prosecute him for the seven charges he didn’t plead to, the U.S. attorney’s office spokesman said.
There is also no plea agreement between Waksal and prosecutors, and government lawyers could still bring charges against “others,” the spokesman said.
“Waksal didn’t plead guilty to everything in the indictment,” the spokesman said. “The investigation is continuing and it could lead to additional charges.”
Waksal’s decision to plead to certain charges but not others indicates that he is willing to take the fall for the ImClone scandal, said Robert Mintz, a former U.S. prosecutor and expert on white-collar crime.
“This signals that Waksal has always been wiling to plead guilty to certain charges, but the government is apparently demanding terms that [he] is unwilling to meet,” Mintz said.
While Waksal is probably trying to protect his daughter and father, it may well be that his decision will benefit Stewart.
Stewart “can draw some comfort from fact that Waksal appears unwilling to implicate others in this alleged crime,” Mintz said. “It certainly would be a critical nail in the coffin for Stewart if he were to cooperate with the government.”
However, Waksal faces a huge downside to pleading to only six counts. The government has given no assurance that they won’t prosecute on remaining charges.
“He is banking on the possibility the government will simply accept the terms of the plea arrangement as he has now cast them,” Mintz said. “I don’t think it will work.”
Attorneys for Waksal could not be reached for comment.
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