Securities and Exchange Commission
Litigation Release No. 18408 / October 10, 2003
Today, the Securities and Exchange Commission filed a second amended complaint, naming Jack Waksal as a defendant and Patti Waksal as a relief defendant. In its second amended complaint, the Commission charges, among other things, that in late December 2001, Sam Waksal, the then CEO of ImClone Systems, Inc. (IMCL), tipped his father, Jack Waksal, with the disappointing news about ImClone, that the United States Food and Drug Administration (FDA) was expected to soon issue a decision rejecting for review ImClone's pending application to market its cancer treatment, Erbitux. Before this news became public, Jack Waksal sold his own ImClone stock and ImClone stock owned by Patti Waksal, who is Jack Waksal's daughter and Sam Waksal's sister. The Commission's second amended complaint alleges that both Sam Waksal and Jack Waksal violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder and that Sam Waksal also violated Section 16(a) of the Exchange Act and Rule 16a-3 thereunder.
Specifically, the Commission's complaint alleges as follows:
The Commission originally filed insider trading charges against Sam Waksal on June 12, 2002 in the United States District Court for the Southern District of New York. On March 11, 2003 the Commission filed an amended complaint against Sam Waksal charging additional insider trading and failure to publicly disclose securities transactions. At that time, without admitting or denying the related allegations, Sam Waksal consented to the entry of a partial final judgment in the Commission's action concerning his own attempted sale of ImClone stock in late December 2001, his options transactions on December 28, 2001, and the sale of ImClone stock in Aliza's brokerage account. Sam Waksal consented to: (a) permanent injunctions from future violations of 17(a) of the Securities Act and Sections 10(b) and 16(a) of the Exchange Act and Rules 10b-5 and 16a-3 thereunder; (b) disgorgement of $804,367 representing (i) the losses avoided by the sales of ImClone stock in Aliza's account, plus prejudgment interest, and (ii) Sam Waksal's profits from the options transactions he engaged in on December 28, 2001, plus prejudgment interest; and (c) an officer and director bar.
In its second amended complaint the Commission seeks to resolve the remaining issues in the case, including (a) Sam Waksal's and Jack Waksal's liability for Jack Waksal's sales of ImClone stock on December 27 and 28, 2001, and (b) civil penalties concerning the totality of the Commission's allegations against Sam Waksal and Jack Waksal.
The Commission's investigation is ongoing. The Commission acknowledges the assistance of the United States Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation in the investigation of this matter.