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U.S. Securities and Exchange Commission

Securities and Exchange Commission
Washington, D.C.

LITIGATION RELEASE NO. 18026 / March 11, 2003

Securities and Exchange Commission v. Samuel D. Waksal

02-CIV-4407 (NB)(S.D.N.Y.)

NEW YORK — The Securities and Exchange Commission today filed additional charges against the former CEO of ImClone Systems Inc. Samuel Waksal, for illegal insider trading and failure to publicly disclose securities transactions. Also today, Waksal consented to a partial resolution of the Commission's claims in which, among other things, Waksal will disgorge over $800,000 in illegal insider trading loss avoidance and profits, including prejudgment interest on those amounts, and be permanently barred from acting as an officer or director of any public company.

The Commission originally filed insider trading charges against Waksal on June 12, 2002 in the United States District Court for the Southern District of New York. In its amended complaint, the Commission charges that in late December 2001, Waksal received disappointing news about ImClone, that the United States Food and Drug Administration 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: (1) Waksal tried to sell a substantial amount of his own ImClone stock; (2) Waksal caused his daughter Aliza Waksal to sell all of her ImClone stock; (3) Waksal purchased ImClone put option contracts; and (4) Waksal told this negative information to a family member who sold ImClone stock. The Commission's amended complaint alleges that based on this conduct, Waksal violated Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 16(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 16a-3 thereunder.

Specifically, the Commission's complaint alleges as follows.

  • On the evening of December 26, 2001, Waksal learned that on December 28, 2001, the FDA was expected to issue a Refusal to File (RTF) letter to ImClone rejecting consideration of its Biologics Licensing Application for Erbitux.
  • Also starting that evening, December 26, and through December 28, Waksal himself tried to sell 79,797 shares of ImClone stock worth nearly $5 million. He was unable to do so only because two different broker-dealers would not execute his orders.
  • Before the market opened the next morning, December 27, Waksal called his daughter Aliza and directed her to sell all of her ImClone stock. Waksal was Aliza's sole means of support and controlled her bank and brokerage accounts.
  • On December 28, Waksal purchased 210 ImClone put option contracts through a Swiss brokerage account.
  • On the evening of December 26, Waksal called a family member to alert that relative that ImClone would be receiving this bad news.
  • As soon as the market opened the next morning, December 27, this family member sold almost $7 million of ImClone stock. This family member continued to sell ImClone stock on December 28 and also sold ImClone stock in the account of a second family member. In total this family member sold more than $8 million of ImClone stock over the next two days.
  • As expected, the FDA faxed ImClone the RTF letter at about 4 p.m. on December 28, 2001. At 6 p.m. that day, ImClone publicly announced the FDA decision. By the close of trading on December 31, the next trading day, ImClone's stock price had dropped 16%, from $55.25 to $46.46.
  • By selling before the announcement that ImClone had received an RTF letter from the FDA, Waksal illegally avoided trading losses and received illegal options trading profits.
  • Waksal failed to file the required documents disclosing his purchase of ImClone put option contracts on December 28.

Waksal has agreed to a partial resolution, subject to the Court's approval, of certain of the charges in the amended complaint. Without admitting or denying the allegations, Waksal has consented to the entry of a partial final judgment in the Commission's action for 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. Waksal has consented to: (a) a permanent injunction 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; (b) disgorge $804,367 representing the losses avoided by the sales of ImClone stock in Aliza's account, plus prejudgment interest and Waksal's profits from the options transactions he engaged in on December 28, 2001, plus prejudgment interest; and (c) an officer and director bar. If the Court approves the proposed partial final judgment, resolution of the remaining issues in the case — specifically, the issues related to Waksal's family member's sale of ImClone stock on December 27 and 28, 2001 and civil penalties concerning the totality of the Commission's allegations against Waksal — will be stayed until entry of judgment with respect to all counts in United States v. Waksal, 02 Crim. 1041 (S.D.N.Y.).
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.

SEC Complaint in this matter



Modified: 03/11/2003