ImClone Ex-CEO Sam Waksal Indicted

Updated from 5:22 p.m. EDT

ImClone Systems ( IMCL) founder Sam Waksal was indicted Wednesday on charges that he tried to use nonpublic information to dump the company's shares days before a negative FDA ruling was announced.

The grand jury charges comes two days before a court-mandated deadline for prosecutors to either indict Waksal or reach a plea agreement with him. Waksal was arrested June 2 under a criminal complaint and had reportedly been in talks to settle the charges, which also involve alleged tips to his father and daughter.

According to the U.S. attorney's office, Waksal was indicted on two counts of conspiracy to commit securities fraud and wire fraud, seven counts of securities fraud, one count of conspiracy to commit perjury and to obstruct justice, one count of perjury, one count of obstruction of justice and one count of bank fraud.

If convicted, he faces a total of 45 years in prison and a $1.5 million fine, or twice the gross gain or loss from the offenses.

Prosecutors have alleged that Waksal made a series of phone calls to his father and daughter in late December advising them to sell ImClone's stock before the Food and Drug Administration rejected an application for the firm's lead cancer drug Erbitux.

Waksal's father Jack allegedly sold shares worth a total of $8.2 million while his daughter sold shares worth $2.4 million. Waksal also tried to park about 80,000 of his own shares, worth $4.9 million, in his daughter's account and sell them through her, but was shut down by brokerage officials who suspected the holdings were governed by ImClone restrictions.

News of the FDA rejection sent Imclone's stock plummeting and shares have fallen 85% since the start of the year.

As a result of the government's investigation, Waksal has been charged with directing an individual to destroy documents subpoenaed by the Securities and Exchange Commission and by agreeing with his father and daughter to testify falsely before the SEC.

The government also charged Waksal with attempting to defraud Bank of America by pledging ImClone securities that he no longer owned to secure loans. He allegedly forged the signature of ImClone's general counsel to falsely represent that he owned the securities.

The scandal has swept up Waksal's friend Martha Stewart, CEO of Martha Stewart Omnimedia ( MSO), who also sold a block of shares in the days before the information became public. Stewart claims her shares were sold according to pre-existing orders, but an assistant to her Merrill Lynch ( MER) broker has reportedly told prosecutors that the sales were based on information that Waksal family members were exiting the stock.

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