Waksal's Dad Charged With Insider Trading
Oct. 11, 2003
NEW YORK (AP) _ Government regulators brought civil charges of insider trading against the father of former drug-company executive Sam Waksal on Friday, saying the father sold more than $8 million of stock based on a tip from his son.
The charges against Jack Waksal, 82, were made in a lawsuit filed in U.S. District Court in Manhattan, where Sam Waksal pleaded guilty a year ago to securities fraud for tipping his daughter to dump ImClone Systems Inc. stock just before the Food and Drug Administration publicly announced it was refusing to accept the company's application to market the colon cancer drug Erbitux. At the time, the FDA said the application was incomplete.
Late Friday, ImClone and its partner Bristol-Myers Squibb Co., announced that the Food and Drug Administration had finally accepted the application for Erbitux
The companies said regulators granted a priority review for the drug, which is used in combination with chemotherapy for the treatment of colon cancer. The FDA now has until Feb. 13 to take action on the application.
The SEC also seeks in court papers to force Sam Waksal's sister, Patti Waksal, to give back profits from 1,336 ImClone shares that the SEC said her father sold improperly for her. The SEC did not accuse her of violating securities laws herself.
Reached by telephone at his East Hampton residence, Jack Waksal said he had not heard of the charge. The government said Waksal also has a residence in Hallandale, Fla.
``Sorry, I cannot talk now,'' he said, declining comment.
His lawyer, Charles Stillman, issued a statement saying, ``We will respond in due course to the civil action by the SEC for money damages.''
Sam Waksal, co-founder and former chief executive of ImClone, is serving a sentence of seven years and three months at the Schuylkill Federal Correctional Institution in eastern Pennsylvania.
In court papers, the SEC said Sam Waksal tipped his father after learning privately on Dec. 26, 2001, that the FDA would issue a negative report on Erbitux.
ImClone had initially filed an application for Erbitux earlier in 2001, and the FDA rejected it, claiming the trials were shabbily conducted and it could not determine if patients' improvements were a result of Erbitux, the irinotecan or the combination of both.
The SEC said Waksal told his father of the impending FDA announcement, causing Jack Waksal to sell more than 110,000 shares of ImClone stock for more than $8 million on Dec. 27 and Dec. 28, 2001. It said he engaged in insider trading again when he sold the stock owned by Patti Waksal, 47, of Bethesda, Md.
The ImClone Systems controversy eventually ensnared Waksal family friend and style maven Martha Stewart, who goes to trial Jan. 12 on charges she ordered her stockbroker to sell ImClone because she heard the Waksals were planning to sell their shares.
The FDA report, when made public, caused the value of the company's stock to plummet.
The SEC said Jack Waksal later provided false and misleading explanations for his trades and falsely testified about the events of Dec. 26 through Dec. 28 when the SEC questioned him.