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Waksal's Dad Charged With Insider Trading

Posted on: Friday, 10 October 2003, 06:00 CDT

The federal government brought a civil charge of insider trading Friday against the father of former drug-company executive Sam Waksal, saying he sold more than $8 million of stock based on a tip from his son.

The charge against Jack Waksal, 82, was made in a lawsuit filed in U.S. District Court in Manhattan, where Sam Waksal pleaded guilty a year ago to securities fraud for tipping his daughter to dump ImClone Systems stock just before a negative government report was issued.

Home decor maven Martha Stewart is also accused of ordering her stockbroker to sell ImClone stock because she heard the Waksals were selling their shares. She has pleaded innocent to charges of obstruction of justice and securities fraud.

Reached by telephone at his Hamptons home, Jack Waksal declined to comment on the charge. His lawyer, Charles Stillman, issued a statement saying, "We will respond in due course to the civil action by the SEC for money damages."

Sam Waksal is serving a sentence of seven years and three months at a federal prison in Pennsylvania.

In court papers, the Securities and Exchange Commission said Sam Waksal tipped his father after learning privately on Dec. 26, 2001, that the U.S. Food and Drug Administration would issue a negative report on ImClone's cancer drug, Erbitux. At the time, the FDA said the application was incomplete.

The SEC said Waksal told his father of the impending FDA announcement, causing Jack Waksal to sell more than 110,000 shares of ImClone stock for more than $8 million on Dec. 27 and Dec. 28, 2001.

The FDA report, when later made public, caused the value of the company's stock to plummet.

The SEC said Jack Waksal later provided false and misleading explanations for his trades and falsely testified about the events.

The agency also is seeking to force Patti Waksal, Sam Waksal's sister, to give back profits from 1,336 Imclone shares that the SEC said Jack Waksal sold improperly for her. The SEC did not accuse her of violating securities laws herself.

Late Friday, ImClone and its partner Bristol-Myers Squibb Co., announced that the FDA had finally accepted the application for Erbitux.

The companies said regulators granted a priority review for the drug, which is used in combination with chemotherapy for the treatment of colon cancer. The FDA now has until Feb. 13 to take action on the application.

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