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ImClone Sam Waksal Sentenced to 7 Years in Prison6 min read

A federal judge yesterday sentenced Samuel D. Waksal, the founder and former chief executive of ImClone Systems, to more than seven years in prison for securities fraud, perjury and other crimes he committed while orchestrating ImClone stock trades for himself and family members at the end of 2001.
Dr. Waksal, 55, became the first chief executive to be sentenced to prison in the recent spate of high-profile corporate scandals. He received the maximum amount of time recommended under federal sentencing guidelines, a strong statement by Judge William H. Pauley III.
“The harm that you wrought is truly incalculable,” Judge Pauley told Dr. Waksal, who appeared calm but squeezed his left hand around his right as the judge spoke. “You abused your position of trust as chief executive officer of a major corporation and undermined the public’s confidence in the integrity of the financial markets. Then you tried to lie your way out of it, showing a complete disregard for the firm administration of justice.”
His lawyer had tried to win leniency for Dr. Waksal by arguing that his work with Erbitux, a cancer drug developed while he was in charge of ImClone, had given hope to cancer patients. But the strategy fell flat, as did a personal statement delivered by Dr. Waksal. The stock trades all took place after Dr. Waksal learned that ImClone’s application for approval of the drug by the Food and Drug Administration had been rejected, but before the company made that news public.
Dr. Waksal’s father, Jack, his daughter Aliza and other supporters who crowded into the courtroom wept as the sentencing ended. Dr. Waksal embraced his 80-year-old father, telling him, “It’s going to be all right,” before leaving the courtroom.
On Dec. 26, 2001, Dr. Waksal was vacationing in the Caribbean when he learned of the Erbitux rejection from his brother, Harlan. It was a setback that could delay, but not necessarily preclude, eventual sales of the drug, which had been shown to shrink tumors in some cancer patients. Over the next two days, Dr. Waksal, his father and his daughter all sold or tried to sell thousands of ImClone shares they owned. After the stock market closed on Dec. 28, the company announced the rejection, sending the share price into a tailspin.
Dr. Waksal, who tried unsuccessfully to sell 80,000 shares of his own, admitted telling his daughter to sell 40,000 shares and later to lie to federal investigators about the reasons for the trade. He was indicted last August on 13 counts of securities fraud, conspiracy, perjury and obstruction of justice. He pleaded guilty to six counts in October; the other seven, including a charge that he told his father to sell shares, were dismissed yesterday.
In March, Dr. Waksal pleaded guilty to tax fraud and conspiracy in an unrelated case in which he evaded $1.26 million in sales tax owed on purchases of contemporary art from the Manhattan dealer Larry Gagosian.
The investigation into the stock trading has also washed across Martha Stewart, a close friend of Dr. Waksal, who sold nearly 4,000 ImClone shares on Dec. 27. She was indicted last week for securities fraud and obstruction of justice and has pleaded not guilty. The Securities and Exchange Commission also sued her for insider trading. She stepped down as chairwoman and chief executive of her own company, Martha Stewart Living Omnimedia, hours after her arraignment. Her former stockbroker at Merrill Lynch, Peter E. Bacanovic, was also indicted and pleaded not guilty.
Erbitux has regained some of its luster, and ImClone’s share price has risen from the low of $5.24 it hit after publicity about the rejection and the insider trading investigations. The shares closed yesterday at $36.30, up 84 cents. Dr. Waksal and his lawyer contended in court yesterday that he had performed an important public service for cancer patients in working to market the drug — service that warranted a lighter sentence than the guidelines recommend.
“By dint of this effort, this vision and his devotion, medical science has a drug that is known to be an effective weapon in the fight against cancer,” his lawyer, Mark Pomerantz, told the judge.
The lawyer’s wide-ranging address cited Dr. Waksal’s affection for his two daughters, his career as a researcher, his parents’ suffering during the Holocaust and his close ties to Jimmy Carter — the ImClone janitor, not the former president — among the reasons for reduced punishment for his crimes.
The actress Lorraine Bracco, who plays a psychiatrist on the television series “The Sopranos,” was among more than 100 people who wrote letters on Dr. Waksal’s behalf; hers said that he had helped her through a bleak period when her child was sick.
“I don’t pretend to know about Sam’s business, but I do know that without Sam’s guidance and support, I wouldn’t be here,” she wrote.
A six-page letter written to Judge Pauley by Dr. Waksal, dated Monday, included references to “The Stranger” by Albert Camus as well as to the Talmud. It ended with a request for community service “as part of my sentence so I can continue to make amends to society and let me keep giving back.”
Yesterday, Dr. Waksal addressed the court, saying that he wanted to apologize to his family, his employees and ImClone investors. “I feel great remorse about what I did, but I do not feel bitter,” he said. “I feel gratitude for everything this country has allowed me to do.” He added: “I know that life begins on the other side of despair.”
Addressing the judge directly, he said: “Please know how much I have tried to do for cancer patients. These proceedings have been about commitments I did not keep. They haven’t been about commitments I did keep.” He referred to Erbitux as “one of the most important things in my life,” and said it was “moving forward to help cancer patients.”
But Judge Pauley was unimpressed, telling Dr. Waksal that “your spectacular success in building ImClone into a company worthy of inclusion in the Nasdaq 100 led you to disconnect from reality and, most importantly, from the rule of law.”
He ordered Dr. Waksal to spend 87 months in prison and pay a $3 million fine, due by mid-September. After the prosecutor argued that Dr. Waksal’s large debts, dwindling assets and unemployment might encourage him to flee, Judge Pauley assigned him to 24-hour house arrest with electronic monitoring until he reports to prison next month.
The prosecutor, Michael S. Schachter, contended in a court filing that Dr. Waksal should be sentenced to more than 87 months, citing his multiple acts of obstruction of justice as well as the bank fraud the government says he committed by using shares as collateral for loans.
Mr. Pomerantz asked that Dr. Waksal be assigned to the federal prison at Eglin Air Force Base in Valparaiso, Fla., saying it would enable him to be close to his parents. He also asked that he be allowed to remain free until Aug. 12, without stating a reason. The judge ordered him to begin serving his sentence July 2.
New York Times June 11, 2003