ImClone's Waksal indicted on insider trading charges

NEW YORK -- Former ImClone Systems chief executive Samuel Waksal, whose arrest on insider trading charges has cast suspicion on Martha Stewart, was indicted Wednesday, apparently after attempts to cut a deal with prosecutors broke down.

The indictment, filed in federal court in Manhattan, brings new charges of obstruction of justice and bank fraud against Waksal in addition to previous securities fraud and perjury charges.

Waksal's attorney, Mark Pomerantz, said his client was "presumed to be innocent, and he will respond to these charges as required."

The bank fraud count -- which carries a maximum sentence of 30 years in prison -- alleges Waksal defrauded Bank of America between April 1999 and January by securing $44 million in loans with ImClone stock he no longer owned.

The obstruction count accuses Waksal of ordering the destruction of ImClone computer files containing phone messages and records of his offshore accounts at banks in Switzerland and the Netherlands. Prosecutors say the files and records could have revealed the identities of his insider trading partners and where he may have hidden illicit gains.

Stock tips

In June, Waksal -- a friend of Stewart's -- was arrested for allegedly tipping off members of his family to sell ImClone stock. Waksal's lawyers and prosecutors had been trying to work out a plea bargain before the deadline for indicting him.

A plea bargain presumably would have required him to reveal whether he warned family and friends, including Stewart, of problems in winning federal approval of ImClone's cancer-fighting drug. Waksal resigned as CEO in May.

Prosecutors accused Waksal of secretly advising his daughter, Aliza, and father, Jack, to sell on Dec. 27 after learning in advance that his biotech company's effort to win approval for the highly touted cancer drug, Erbitux, had been rejected by the Food and Drug Administration. Waksal had tried to sell his shares but brokerage firms refused to process the order.

The stock collapsed after the FDA decision was announced.

Investigators also targeted Stewart, chief executive officer of Martha Stewart Living Omnimedia Inc., after learning that the home-design magnate sold nearly 4,000 shares on Dec. 27.

Stewart has said she simply had a standing order to sell her stock when it went below $60. But doubt has been cast on that assertion because she and her Merrill Lynch broker, Peter Bacanovic, differ on when the order was placed.