Risk & Compliance

Waksals Settle ImClone Charges

The former chief executive and his father will pay disgorgement and prejudgment interest of more than $2 million and a civil penalty of more than $...
Stephen TaubJanuary 20, 2005

Former ImClone Systems Inc. chief executive officer Samuel Waksal and his father, Jack Waksal, have agreed to pay more than $5 million to settle civil charges of illegal insider trading, according to the Securities and Exchange Commission. The two individuals consented to the deal without admitting or denying the commission’s allegations.

Under a partial settlement reached in March 2003, Sam Waksal paid more than $800,000 in disgorgement and prejudgment interest, was permanently barred from acting as an officer or director of any public company, and was enjoined from future violations of the antifraud and other provisions of the federal securities laws. That year he was also sentenced to seven-plus years in prison on related criminal charges.

If approved by the court, these final judgments will resolve all of the insider trading charges against the Waksals, the SEC stated.

In its complaint, the commission charged that in late December 2001, Sam Waksal learned that the Food and Drug Administration would soon announce its rejection of ImClone’s application to market its cancer treatment drug Erbitux. Before ImClone publicly announced the FDA’s decision on December 28, alleged the commission, Sam Waksal tried to sell shares of ImClone worth nearly $5 million; directed his daughter, Aliza, to sell all of her ImClone stock; purchased 210 ImClone put option; and passed along the FDA information to his father, who sold his own ImClone stock as well as the ImClone stock of Sam’s sister Patti Waksal.

Martha Stewart, a friend of the Waksals and the former chief executive officer of the company that bears her name, was convicted last March on one count of conspiracy, two counts of making false statements, and one count of obstruction of agency proceedings in her trial regarding her sale of ImClone stock shortly before the FDA announcement. She is currently serving a five-month prison sentence.

Under Wednesday’s announced settlement, Sam Waksal agreed to be held liable with Jack Waksal for disgorgement and prejudgment interest of more than $2 million, mostly representing Jack’s sales of ImClone stock in his own brokerage accounts, as well as a civil penalty of more than $3 million. Jack Waksal consented to be permanently enjoined from violating the antifraud provisions of the federal securities laws, as Sam Waksal had agreed in last March’s partial settlement.