It Doesn't Look Good For Martha

[Darryl G. Thomas]

ImClone's Ex-CEO Waksal Sentenced to 7 Years Prison
Ordered to Pay Over $4 Million in Fines, Back Taxes

By Erin McClam
Associated Press
Tuesday, June 10, 2003; 2:10 PM

NEW YORK - ImClone Systems founder Sam Waksal was sentenced Tuesday to seven years and three months in prison for an insider-trading scandal that ensnared his family and threatens Martha Stewart
and her home decorating empire.

He also was ordered to pay more than $4 million in fines and back taxes.

U.S. District Judge William H. Pauley rejected Waksal's plea for a lighter sentence based on ImClone's cancer research, Waksal's humanitarian works and the intense media interest surrounding the case.

"The harm that you wrought is truly incalculable," the judge said.

Earlier, with his voice breaking, Waksal apologized in court to his family and former employees.

"I am deeply disturbed and so very sorry for my actions," he said. "I want to apologize to all the people who may have had confidence in me and whose confidence I betrayed."

The judge ordered Waksal to report to federal prison July 2. Until then, he must remain in his Manhattan apartment - except for appointments with his lawyers - and submit to electronic monitoring.

After the sentence was handed down, Waksal hugged his brother and his 80-year-old father in the courtroom. He did not immediately make a statement.

Waksal, who once rubbed shoulders with rock stars and cut a flamboyant figure in the mostly staid pharmaceutical industry, pleaded guilty in October to six counts, including securities fraud, bank fraud,
conspiracy to obstruct justice and perjury. The charges cover insider trading and the evasion of $1.2 million in sales taxes on fine art.

Assistant U.S. Attorney Michael Schachter asked for more than seven years, saying Waksal "told numerous, separate and distinct sets of lies" surrounding his family's sale of ImClone stock. Waksal faced a
maximum of up to 75 years in prison; federal sentencing guidelines call for six to seven years.

Waksal admitted to a scheme in which he tipped his daughter, Aliza, to dump ImClone stock just before it plunged in value on news that the Food and Drug Administration would not review his company's
experimental cancer drug, Erbitux.

Stewart, a close friend of Waksal, was indicted last week on five federal counts - including obstruction of justice, conspiracy and lying to investigators - tied to her December 2001 sale of nearly 4,000 shares
of ImClone stock. She pleaded innocent to all charges.

Her former stockbroker, Peter Bacanovic, also was indicted and pleaded innocent. Prosecutors said Bacanovic illegally sent word to Stewart that Waksal's family was planning to unload shares of ImClone.

In a packed courtroom and with dozens of cameras ringed around the Manhattan courthouse, Waksal lawyer Mark Pomerantz tried to distance his client from the scandals that had shaken confidence in
corporate America.

"He has been worried that he's going to be held responsible for companies and situations that he had nothing to do with," Pomerantz said.

But Schachter said Waksal had violated "a sacred trust with his shareholders" and blamed him for doing national harm with a crime made worse by his position as chief executive officer.

"It runs the risk of sending the message to investors that the game is rigged," he said of Waksal's actions.

A week ago, ImClone stock surged after European researchers reported that Erbitux does appear to be effective, helping some of the sickest colon cancer patients live longer.

"The past few weeks should have been a moment of glory for Sam Waksal. But there's no glory for Sam Waksal," Pomerantz told the judge.

Waksal told the judge, "To cancer patients I am so sorry for any delay I might have effected in the approval of Erbitux because of my actions."

Pomerantz portrayed Waksal as fiercely devoted to ImClone and said he covered up the insider trading because he did not want to have to leave the company.

The lawyer said the insider trading "took place literally on the spur of the moment."

"This was not a sophisticated, highly planned course of conduct that extends over time," he said.

Waksal, in a letter to the court, said: "I tore my family apart. That punishment is with me every moment of the day. I dream about it."

Pomerantz submitted 120 letters of support for Waksal to the judge, saying they showed his client was a caring, dedicated leader.

The charges against him were not all directly related to insider trading.

In pleading guilty to bank fraud, Waksal said he forged a lawyer's signature on paperwork for a $44 million bank loan. On the obstruction count, Waksal admitted he ordered staff to keep certain financial
records from leaving his office, knowing the Securities and Exchange Commission would be interested in them.

Prosecutors say Waksal also ordered the destruction of computer files, phone messages and other records, though he did not admit to those allegations. He pleaded guilty to conspiring with an art dealer to
dodge $1.2 million in sales tax on nine paintings that cost him a total of $15 million.

In March, Waksal agreed to an $800,000 fine and a lifetime ban on leading a public company in a partial settlement of civil charges relating to the scandal filed by the Securities and Exchange Commission.

[Jimmy Cantiello]

Hey, look at the bright side. Martha's fellow inmates can look forward to freshly baked chocolate chip cookies and those wonderfully fluffy down comforters..............

[clinthopson]

Meanwhile Kenny Lay and his Enron buddies sail right along.

I couldn't have anything to do with campaign contributions could it?

[graypencil]

Like Clint, I too await the perp walks of Lay, Bernie Ebbers, and the rest of the REAL big time crooks (..hopefully with anal bullseyes stenciled on their orange Marion Illinois jumpsuts ..)

it is amazing how quickly these megafelons have dropped off the publics radar screen of late ..I guess they're more intersted in the gory details of Lacy Peterson and the Leonaization of Martha Stewart ..

"give them bread and circuses " ( Julius Caesar Wm Shakespere .. )

[BFrank]

Originally posted by clinthopson
Meanwhile Kenny Lay and his Enron buddies sail right along.

I couldn't have anything to do with campaign contributions could it?

Yep, Kenny-boy sure has been conspicuous in his absence. I won't be holding my breath waiting for him to be brought to justice, that's for sure.

[shrugs]

Doesn't he probably have some skinny on some certain individuals?

[Uli]

I think Martha will walk. I have not followed it closely but I think she is not indicted for insider trading only for obstruction of justice.

Maybe somebody knows more.

[Dr Dave]

Uli: No, you've got it right. I don't think there's much of a case there. It is interesting to see Kenneth Lay's name come up again in the wake of Martha's troubles. Here's a recent BBC news item:

Third top Enron executive arrested

A former top trader at failed energy giant Enron has been arrested over charges that he helped manipulate California's energy market, which three years ago saw the state suffer rolling black-outs.
At the time John Forney was the head of Enron's "real-time" power-trading operations in the west of the USA.

Mr Forney is accused of being the architect of illegal trading schemes that drove up electricity prices by circumventing price caps and caused energy shortages across California.

"Our investigation of illegal activities during the energy crisis is active and continuing and remains one of this office's and the Justice Department's top priorities", said Kevin Ryan, US Attorney for the Northern District of California.

Enron collapsed in autumn 2001 after the company was forced to admit that it vastly overstated the value of its assets and profits and hid billions of dollars of debt.

California crisis

Mr Forney's arrest, however, is not linked to the practices which led to the downfall of Enron.

But it strengthens the case of those who argue that California's energy crisis of the years 1999 to 2001 was not caused by flawed regulation of the state's electricity market, but by outright market manipulation.

"While California consumers were suffering through blackouts... Enron was manipulating western energy markets for profit through illegal, fraudulent means," Mr Ryan said.

Mr Forney is alleged to have invented a scheme known as "ping pong", which saw cheap energy exported out of California and then re-imported at a much higher price, thus circumventing federal price caps on California energy.

Another scheme, dubbed "Death Star" by Enron traders, exploited weaknesses in California's energy management system.

Experts estimate that the energy crisis cost the state of California about $42bn.

Mr Forney is the third Enron trader arrested in connection with the Californian energy crisis.

In October 2002 and February this year, former Enron executives Timothy Belden and Jeffrey Richter pleaded guilty to conspiracy to commit wire fraud in connection with Enron's trading schemes.

Mr Forney himself is now working for American Electric Power in Columbus, Ohio. In a statement, the company said the arrest was related solely to Mr Forney's activities at Enron.

The Enron collapse

Enron's downfall came after rumours had shattered market confidence for many weeks.

In October 2001 the company finally owned up to its corporate failings and admitted that both its profits and its asset values had been hugely inflated. In December Enron was declared bankrupt.

During the following months investigators began to untangle a web of accounting tricks, phantom profits, tax evasion and dubious corporate practices.

As Enron came tumbling down, so did its auditor Andersen, which fell apart around the world amid allegations of helping Enron devise dubious accounting schemes.

So far, the investigation into Enron's accounting tricks has not yielded a single conviction. (emphasis added)

Former chief financial officer Andrew Fastow has been indicted on 78 charges of money laundering, fraud, conspiracy and obstruction of justice.

But neither former chief executive Jeffrey Skilling nor Enron chairman Kenneth Lay, Mr Fastow's immediate superiors, have yet been charged.

The company itself, meanwhile, is being "restructured" and says it hopes to emerge from bankruptcy as a "viable, albeit smaller company".

[moneyp]

A friend of mine taped NBC's television movie "Martha Inc." starring Cybill Shepard. This was actually better than it had any right to be. I don't know if Christopher Byron's book, upon which it's based, is supposed to be funny but the adaptation certainly is. Director Jason Ensler (who also did the Three's Company TVM, something else I want to see) and writer Suzette Couture recognise the absurdity of Martha's rise to power and play it for all it's worth, giving the story just a hint of comic surreality. Good performances from Sheperd, Tim Matheson as her husband, Dorie Barton as young Martha and especially Jude Cicolella as her father. Surprisingly well put together and very amusing.

It's amazing that this came off without a lawsuit. It certainly doesn't do Martha any favors image-wise, although it does acknowledge that she's been convicted basically before even being tried.

[frankpop1]

one has to wonder what goes on with the feds. as i read it, martha gets a call from her broker. some are selling do u want to sell? she answers 'yes'

the feds ask whether this conversation happened and allegedly she denies that it did.

now, if the conversation happened, then the feds theory is that she lied. it is not insider trading...as yet, anyway.

if so, is lying about an incidence to feds, then considered obstructing justice. their theory seems to be she lied about an incident that she was innocent of.