ImClone Systems founder Sam Waksal has decided to plead guilty in the biotech company’s insider trading scandal, a law enforcement source told The Associated Press.
The plea, which was expected Tuesday, could bring even more heat to Martha Stewart, a friend of Waksal who is being investigated for allegedly receiving inside information about the company and dumping ImClone stock before it plummeted.
Waksal was expected to plead guilty to multiple charges, according to the source, who spoke on the condition of anonymity. He faces federal charges of securities fraud, perjury, bank fraud and obstruction of justice.
He could face up to 30 years in prison if convicted of the most serious charge, bank fraud.
A Waksal spokesman declined to comment, as did a spokesman for the U.S. Attorney’s office.
Waksal is just one of many executives who have been accused of white-collar crimes this year. After the collapse of Enron Corp. last year, federal authorities have uncovered corporate scandals at several multibillion-dollar companies, including WorldCom, Tyco International and Adelphia Communications.
The former ImClone CEO was arrested in June on charges of trying to sell his ImClone shares and tipping off friends and family members who held millions of dollars in company stock. He allegedly passed on information that the Food and Drug Administration would not review his company’s application for its experimental cancer drug, Erbitux.
Authorities are investigating whether Waksal tipped off Stewart, who sold nearly 4,000 ImClone shares on Dec. 27 one day before the FDA’s announcement.
At issue is whether Stewart acted on illegally obtained information in selling her stock. The home decorating entrepreneur has denied any wrongdoing and has not been charged. She has maintained that she had a standing order with her stockbroker, Peter Bacanovic, to sell the shares if the stock dropped below $60.
Prosecutors were considering filing charges against Stewart, though Waksal was not expected to testify against her, The Wall Street Journal reported Tuesday.
The Justice Department is investigating whether Stewart knowingly lied to lawmakers about her stock sale.
Her spokeswoman Allyn Magrino did not immediately return a telephone call seeking comment.
An assistant at Merrill Lynch to Bacanovic, Douglas Faneuil, initially backed Stewart’s account, but later admitted that he was not honest when first interviewed by investigators from the Securities and Exchange Commission and FBI agents.
As part of a guilty plea entered this month, Faneuil agreed to testify against Stewart and others if they are charged in connection with the scandal. Faneuil pleaded guilty to a misdemeanor charge of accepting gifts to withhold information about Stewart’s sale of her shares.
Waksal resigned in May, when the company learned that federal charges were going to be filed.