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Who is Sam Waksal?; Analysis With Any Serwer, Jeffrey Toobin
Aired June 9, 2003 - 20:16 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDERSON COOPER, CNN ANCHOR: The saga continues. The founder of the biotech company ImClone faces sentencing tomorrow in the insider trading case that's also bedeviling Martha Stewart. Samuel Waksal could receive a hefty fine and up to seven years in prison. CNN Financial reporter Allan Chernoff looks back at Sam Waksal's rise and his fall.
ALLAN CHERNOFF, CNNfn CORRESPONDENT (voice-over): Sam Waksal is an enigma: a Scientist devoted to fighting cancer, yet a businessman who has admitted to lying cheating and defrauding (UNINTELLIGIBLE). A player in New York's high society, yet a man secretly drowning in debt.
College friend Andrea Blanch says Waksal was compassionate towards her ill mother.
ANDREA BLANCH, WAKSAL FRIEND: I called him and I asked him if he could help me find her an oncologist and he did. And he was working at Mount Sinai at the time, and he went every day to see my mother. He was there when she died.
CHERNOFF: Battling cancer, friends say, is an obsession for Sam Waksal who relentlessly pushed his drug Erbitux, also called C225.
SAM WAKSAL, FORMER CEO, IMCLONE SYSTEMS: We feel very confident that we'll be on the market next year with a very important new drug.
CHERNOFF (on camera): Sam Waksal lives in a penthouse of this building in Manhattan's SoHo Neighborhood. His annual holiday parties here have been packed with a broad range of celebrities ranging from media tycoon Mort Zuckerman to Mick Jagger and, of course, Martha Stewart.
(voice-over): Waksal used social connections to push his company, ImClone Systems. Financier Carl Icahn found him to be persuasive and persistent.
He'd sit around, uninvited, and wait until you got of the court, you know , to have a drink? And he'd be talking about financing -- you'd laugh. He'd just keep talking about it until, eventually, I got interested in it.
CHERNOFF: Waksal bet heavily on his company and when he heard that the Food and Drug Administration would refuse to review the drug, he tried to illegally bail out of the stock.
WAKSAL: I made some terrible mistakes and I deeply regret what has happened. I was wrong.
CHERNOFF: Sam Waksal lived beyond his means. These documents obtained by CNN reveal he was in default on $4.5 million in loans from Bank of America which last month forced him to auction off paintings at Sotheby's. Waksal also pled guilty to evading taxes on the artwork.
This enigmatic man now faces an incredible irony: after laboring for years to bring his drug to market, new trial data from an overseas partner has convinced the Food and Drug Administration to give Erbitux a second look. Waksal's greatest success may be achieved once he's behind prison bars.
Allan Chernoff, CNN, New York.
COOPER: Well we have seen quite a few business barons being accused, even charged with financial wrong doing. But tomorrow Sam Waksal may become the highest-ranking of them all to actually receive a prison sentence. For more on this, let's turn to CNN legal analyst Jeffrey Toobin and "Fortune" magazine editor at large Andy Serwer. Guys, thanks for being with us.
All right, Sam Waksal tomorrow, this is going to happen. Jeffrey, what kind of time is he going to face?
JEFFREY TOOBIN, CNN LEGAL ANALYST: Guaranteed prison sentence. Big, big sentence. His sentencing guidelines are between 70 and 87 months. The government is going to ask that he get more than that. There's no circumstance where he'll get less than 70 months. So you're talking about six, seven, eight, nine years in the federal system, which means no parole.
COOPER: Let's talk about the charges. We've got a screen -- full screen of them. Securities fraud, bank fraud, conspiracy, obstruction of justice, perjury, tax evasion. This is like a potpourri of...
TOOBIN: He was a one-man crime wave basically. It's absolutely true.
COOPER: Are you surprised by all the charges and the fact that he's going to do time?
ANDY SERWER, "FORTUNE": No, I mean this guy has been on the radar screen of investigators for a while. He did something and was caught doing something that was easy for prosecutors to nail him for as opposed to some of the executives at Tyco and Enron, Global Crossing, WorldCom. Those are much more complicated accounting cases. This was basically a simple case of fraud, securities fraud, insider trading and tax evasion...
COOPER: So is he paying the price for the fact that his alleged crime was pretty simple.
SERWER: Well I don't think that's really the case. I mean a cop catches you going 85 miles an hour and you say everyone's going 110, you're still breaking the speed limit.
TOOBIN: But this was a fragrant, flagrant case of insider trading. It is, of course, the same set of trades that led to the Martha Stewart investigation and he was the CEO of ImClone. He got the news that the FDA was going to give a bad report on the drug Erbitux. That day he tried to sell stock, he got his relatives to sell stock. I mean it was textbook insider trading. There was really no defense. That's why...
COOPER: And he was selling stock through the same broker that Martha Stewart would sell stock through.
SERWER: Peter Bacanovic of Merrill Lynch. This is why Martha Stewart is in trouble because basically the government found this flagrant case of insider trading, decided to look at other trades at ImClone in the same day, saw that his close friend Martha Stewart sold stocks. That's why they launched the investigation.
COOPER: It's not just the stock sells. I mean he's pled guilty to -- there was an art tax scheme he was doing.
TOOBIN: Right. He bought millions of dollars worth of art and had it shipped in theory to New Jersey so there would be no sales tax. It was $1.2 million in sales tax he avoided when the sale was going within New York City...
SERWER: To save $1.2 million in sales tax.
COOPER: Do we know -- is some part of this, is there a deal to protect his child, to protect his father? Because there are those charges as well.
SERWER: I'm not sure that exists. I mean basically this guy has said that in fact he wouldn't plead guilty to the charges that involve tipping off his relatives. And in fact, Jeffrey, correct me if I'm wrong, but it's that lack of contrition, because he's not contrite about that that may lead to more prison time. He has basically not acknowledged that he tipped them off.
TOOBIN: It's a very weird situation. There is no plea bargain. He just pled to most of the counts in the indictment and essentially said to the government I dare you to prove the rest. Why bother?
TOOBIN: They're not proving it. But they're using that conduct to say that the judge tomorrow, give him extra time which they're allowed to do under the rules because there's so much more here.
SERWER: And it's a horrible thing too. I mean it's his daughter and father who is a holocaust survivor. He basically got him involved in all this shenanigans.
TOOBIN: I mean it is astonishing how bad this guy is.
COOPER: Now is he going to testify against Martha Stewart?
TOOBIN: Well, no, apparently not. That's another interesting part of this case is that, you know, he had every incentive to make a deal with the government, turn on Martha Stewart, because, after all, she's the big fish here. But as far as we know, and this will be something that will be interesting to find out in court tomorrow. He had nothing bad to say about Martha Stewart. He says he didn't tip her off. The accusation against her is that the tip came through the stockbroker, not from Waksal himself.
SERWER: That's correct. And actually through the broker's assistant, Douglas Faneuil. But I think this also speaks to this guy Waksal. He's charming, engaging, very smart, extremely manipulative. He had New York society wrapped around his fingers. He had Pete Peterson, a former commerce secretary join the board for a while. All these people were involved because of the power of his personality.
TOOBIN: And part of what makes this a great story is that Erbitux, the drug that caused all this, you know what prompted the insider trade was this bad report from the FDA. Now just last week it turns out Erbitux might turn out to be a great cancer drug and the stock is going back up...
SERWER: ... may go back down. I've seen this before. I've been following the stock for a long time and Erbitux has come and gone and back and forth. So the jury's still out on the drug. But it is true that through all this it is a potentially promising drug.
COOPER: All right, let's leave it there, We'll see what happens tomorrow. Jeffrey Toobin, Andy Serwer, thanks very much.
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