June 10, 2003 marks the date Samuel Waksal, former CEO of ImClone Systems, was sentenced to 87 months in prison and fined $3 million for his role in one of the most publicized insider trading scandals in history. The prison sentence was the maximum allowed under insider trading laws. In addition, Waksal had to pay a $1.2 million restitution payment to the state of New York.
The securities fraud charges stemmed from the actions Waksal took just days after he learned that ImClone's marquee cancer drug, Erbitux, would be rejected by U.S. regulators. Regulators said Waksal tried to sell 80,000 shares of ImClone in two days for about $5 million but was rejected by two separate brokers.
Stewarts Hand Caught in Cookie Jar
Publicity surrounding the case intensified after it was learned that home-decorating icon Martha Stewart had also used this insider information to sell 4,000 shares of ImClone on Dec 27, 2001 – one day before the FDA rejected the company's cancer drug application.
Stewart completely denied any wrongdoing, saying "In placing my trade, I had no improper information." Unfortunately for Stewart, the jury thought differently and sentenced her to five months in prison. Interestingly, Stewart only saved $51,000 by acting on the insider information. (Read 4 History-Making Wall Street Crooks to learn about Wall Street's most notorious swindlers.)