ImClone founder's 'arrogance' earns him prison sentence

NEW YORK -- Sam Waksal, the jet-setting drug-company entrepreneur at the center of the insider-trading scandal that has ensnared Martha Stewart, was sentenced to more than seven years in prison Tuesday for what a judge called his "lawlessness and arrogance."

The ImClone Systems founder was also ordered to pay nearly $4.3 million in fines and back taxes.

"The harm that you wrought is truly incalculable," U.S. District Judge William H. Pauley said. He said Waksal had damaged his company, his family and investors nationwide.

Waksal, 55, admitted last fall that he tipped his daughter, Aliza, to dump ImClone stock in December 2001, just before it plunged on a discouraging government report about the ImClone cancer drug Erbitux. Stewart, a friend of Waksal's, also unloaded her stock ahead of the news.

Waksal has not publicly implicated Stewart, who pleaded innocent last week to charges that could undermine her home-decorating empire and put her in prison.

He pleaded in a broken voice for mercy, apologizing to cancer patients for any delay the investigation might have caused in approval of Erbitux.

"I am deeply distressed and so very sorry for my actions," he said. "I want to apologize to all the people who may have had confidence in me and whose confidence I betrayed."

The prison term of seven years and three months was at the high end of federal sentencing guidelines for the eight counts covered by Waksal's guilty plea. The penalties include a $3 million fine and more than $1.2 million Waksal owes New York state for evading taxes on nine paintings he bought in 2000 and 2001.

After being sentenced, Waksal hugged his brother and his 80-year-old father in the courtroom. He did not address camera crews and reporters outside the courthouse.

Heading to prison

The judge ordered Waksal to report to prison July 2. Until then, he must remain in his New York City apartment -- except for appointments with his lawyers -- and submit to electronic monitoring.

According to prosecutors, he learned in advance that the Food and Drug Administration had decided not to review ImClone's application for Erbitux.

The judge said Aliza Waksal saved more than $630,000 when she sold at her father's encouragement. He said Waksal tried to save more than $1 million himself by transferring his own stock to Aliza's account -- a move blocked by his brokerage.

Prosecutors said Stewart dumped 4,000 shares of ImClone on a tip from stockbroker Peter Bacanovic that the Waksal family was planning to sell. Bacanovic has also pleaded innocent.

Waksal's lawyers provided the judge with a binder of roughly 120 letters of support, including one from actress Lorraine Bracco of "The Sopranos," who praised him for helping her during personal troubles.

Waksal attorney Mark Pomerantz said that the ImClone executive -- unlike other corporate chiefs accused of looting their own companies -- had simply made a few bad decisions at a time when his family needed money.

"These are not the diabolical acts of a professional criminal," Pomerantz said.

But the judge said Waksal's crimes were "not simply a 24-hour window of catastrophically poor judgment or a crime of impulse."

"These crimes are emblematic of lawlessness and arrogance from your own self-described short-term cash flow needs," Pauley said.

Waksal has admitted forging a lawyer's signature on paperwork for a $44 million bank loan. He has also said he ordered staff to keep certain financial records from leaving his office, knowing the Securities and Exchange Commission would be interested in them.

Prosecutors said Waksal also ordered the destruction of computer files, phone messages and other records.

Aliza Waksal has not been charged with a crime, and some analysts speculated Sam Waksal's guilty plea was partly designed to save his daughter from prosecution. Michael Kulstad, a spokesman for U.S. Attorney James Comey, declined to comment Tuesday on whether the investigation into the Waksal family was closed.

In March, Waksal agreed to an $800,000 fine and a lifetime ban on leading a public company in a partial settlement of civil charges filed by the SEC.

Last week, a new study conducted in Europe found Erbitux does appear to be effective, helping some of the sickest colon cancer patients live longer. ImClone stock surged on the news.

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On the Net

ImClone: www.imclone.com

SEC: www.sec.gov