NEW YORK, Oct. 15--Samuel Waksal, founder and
former chief executive of ImClone Systems Inc.,
pleaded guilty to six criminal charges this morning in the
insider-trading case that has
ensnared lifestyle guru Martha Stewart.
Waksal, who resigned from the New York-based biotechnology company earlier this year
growing controversy, pleaded guilty in federal court to charges of securities fraud,
fraud and obstruction of justice. The charges carry a maximum prison sentence of 65 years.
"I am aware that my conduct, while I was in possession of material non-public
was wrong," Waksal told the judge.
Waksal had been charged with 13 counts on June 12. It was not immediately clear if the
remaining charges would be taken to trial, but prosecutors said there had not been a plea
agreement leading to Waksal's actions today.
Waksal has been negotiating with prosecutors for weeks to try to secure a lighter
and to protect family members who have also been targeted in the probe.
Prosecutors have been discussing whether to bring charges against Waksal's father,
and his daughter Aliza. They are accused of selling about $10 million worth of ImClone
after being tipped off by Samuel Waksal about impending bad news about the ImClone's main
product, the cancer-fighting drug Erbitux. Stewart, a close friend of Samuel Waksal's,
nearly 4,000 shares of ImClone, worth about $230,000.
The questionable stock sales took place just before the firm announced late last year
Food and Drug Administration had rejected an initial application to approve Erbitux, a
showed early promise in treating colorectal cancer. ImClone shares, already dropping,
steep decline after the Erbitux announcement. Stewart has said she sold because she had a
agreement to liquidate her ImClone holdings when the share priced dropped below $60, as it
Dec. 27, the day of her sale. ImClone announced the FDA decision Dec. 28.
But Merrill Lynch, the brokerage firm that handled Stewart's
trade, turned up no solid evidence
of such an agreement in an internal investigation. And an assistant to Stewart's Merrill
broker pleaded guilty early this month to helping concoct the story of the
The assistant, Douglas Faneuil, told a judge that the Merrill broker, Peter Bacanovic,
extra vacation and an airline ticket to mislead Securities and Exchange Commission and FBI
investigators about what he knew.
Legal experts have said Faneuil's plea would put pressure on Bacanovic to cooperate in
ImClone investigation. Neither Bacanovic nor Stewart has been charged with any crime.
Prosecutors are said to be considering charges of both insider trading and obstruction of
justice against Stewart, chief executive of Martha Stewart Living Omnimedia Inc.
An attorney for Stewart could not be reached for comment regarding Waksal's anticipated
plea. Shares in Stewart's company have suffered badly under months of tabloid headlines
her ImClone trade.
In August, Waksal, a New York socialite long known for his lavish parties and famous
pleaded not guilty to multiple counts of securities and bank fraud.
The bank-fraud charge alleges that he used ImClone shares he no longer controlled to
$44 million in loans from Bank of America. That charge, the most serious of the 13 counts
gainst Waksal, carries a maximum sentence of 30 years in prison. He also is charged with
obstruction of justice and a handful of other offenses.
Prosecutors allege that two Waksal family members, identified by sources as his father
daughter, started quickly selling their ImClone shares in late December after Samuel
alerted them to the impending bad news. Waksal also allegedly attempted to sell $5 million
of his own ImClone shares through a family member's account but had the sales refused by
brokers who cited a company ban on insider sales.
A source familiar with the case said recently that prosecutors had been negotiating a
arrangement with Waksal's attorneys. Talks broke down, the source said, when the two
sides could not agree on the size of a fine or the length of a prison term.