Samuel Waksal, the former CEO of ImClone Systems Inc., and his father, Jack Waksal, have agreed to a final resolution of the insider trading case brought against them by the Securities and Exchange Commission.
In documents filed on Wednesday with the federal court in Manhattan, Sam Waksal and Jack Waksal, without admitting or denying the allegations in the Commission's complaint, consented to pay more than $5 million in disgorgement and civil penalties from their unlawful trades in ImClone securities. Pursuant to a March 2003 partial settlement, Sam Waksal previously paid over $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. If approved by the court, the final judgments will resolve all of the insider trading charges against the Waksals.
In its complaint, the Commission charged that in late December 2001, Sam Waksal received disappointing news that the U.S. Food and Drug Administration was expected to soon issue a decision rejecting for review ImClone's pending application to market its cancer treatment drug, Erbitux. With that inside information in hand, and before ImClone publicly announced the FDA's decision on Dec. 28, 2001, Sam Waksal: (1) unlawfully tried to sell shares of ImClone worth nearly $5 million between Dec. 26 and 28; (2) directed his daughter, Aliza, to sell all of her ImClone stock on December 27; (3) purchased 210 ImClone put option contracts through a Swiss account on December 28; and (4) tipped his father, Jack Waksal, who sold his own ImClone stock as well as the ImClone stock of Patti Waksal, Jack's daughter and Sam's sister, on December 27 and 28.
As part of today's settlement, Sam Waksal has consented to (a) be held jointly and severally liable with Jack Waksal for disgorgement and prejudgment interest of $2,019,030, representing Jack's sales of ImClone stock in his own brokerage accounts ($1,926,716) and in Patti Waksal's brokerage account ($21,088), plus prejudgment interest ($71,226); and (b) a civil penalty of $3,017,464. Jack Waksal has consented to (a) pay disgorgement and prejudgment interest of $2,019,030; and (b) be permanently enjoined from violating the antifraud provisions of the federal securities laws. As part of the March 2003 partial settlement, Sam Waksal previously consented to (a) pay $804,367, representing the losses avoided by the sales of ImClone stock in Aliza Waksal's account and Waksal's profits from his options transactions ($760,425), plus prejudgment interest ($43,942), as well as the other relief set forth above. As a result of a separate criminal proceeding, Sam Waksal is currently serving 87 months in federal prison in connection with the facts giving rise to the Commission's complaint in this action.
Mark K. Schonfeld, Director of the Commission's Northeast Regional Office, said, "This settlement serves as a reminder to chief executives that the insider trading laws are integral to maintaining fairness in our marketplace."
The Commission acknowledges the assistance of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation in this matter.