Criminal Activity and Conviction
Waksal got wind of the FDA's rejection on Christmas Day 2001. Unable to get the FDA to reconsider, ImClone began drafting a press release announcing Erbitux' rejection. It was due to go out at the close of business on December 28. Until then, under federal securities law, Waksal was barred from selling his ImClone stock or telling anyone about the pending rejection. However, Waksal knew the Erbitux rejection would open up an avalanche of financial problems. More seriously, it would potentially expose the fact he'd pledged a warrant to buy ImClone shares as collateral for a loan from Bank of America, even though he'd already executed the warrant in 2000. If Bank of America discovered the warrant no longer existed, Waksal could have been charged with bank fraud. He tipped off several of his friends and family to sell their ImClone stock When Waksal's broker at Merrill Lynch, Peter Bacanovic, realized what was going on, he alerted their mutual friend, Martha Stewart, that ImClone was about to lose a good deal of its value.
Waksal was arrested June 12, 2002 on insider trading charges. On October 15, he pleaded guilty to charges of securities fraud, bank fraud, obstruction of justice, and perjury.
On March 3, 2003 he pleaded guilty to charges of conspiracy and wire fraud for avoiding $1.2 million in sales taxes on $15 million in artwork. The art included works by Mark Rothko, Richard Serra, Roy Lichtenstein, and Willem de Kooning, purchased between June 2000 and October 2001. He did not pay the necessary taxes at the time of purchase, but did pay the taxes in fall 2002.
On June 10, 2003, Waksal was sentenced to seven years and three months in prison and ordered to pay more than $4 million in fines and back taxes, all the maximum punishments allowable under law. Waksal wanted to go to Federal Prison Camp, Eglin, but instead he went to Federal Correctional Institution, Schuylkill. He was serving time in the Federal Correctional Institution, Otisville in New York state. Waksal, Federal Bureau of Prisons (BOP) # 53803-054, was released from BOP custody on February 9, 2009.
Read more about this topic: Samuel D. Waksal
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