Indictment and SEC Charges
Waksal was arrested June 12, 2002 on charges of conspiring to commit insider trading. On October 15, he pleaded guilty to charges of securities fraud, bank fraud, obstruction of justice, and perjury.
On March 3, 2003 he pleaded guilty to charges of conspiracy and wire fraud for avoiding $1.2 million in sales taxes on $15 million in artwork. The art included works by Mark Rothko, Richard Serra, Roy Lichtenstein, and Willem de Kooning, purchased between June 2000 and October 2001. He did not pay the necessary taxes at the time of purchase, but paid in fall 2002.
On June 10, 2003, Waksal was sentenced to seven years and three months in prison and ordered to pay more than $4 million in fines and back taxes, all the maximum punishments allowable under law. Waksal was released in 2009.
On June 4, 2003, a federal grand jury in Manhattan indicted Stewart and her former broker, Peter Bacanovic on nine criminal counts. The government alleged that, by selling when she did, Stewart avoided losses of $45,673. The charges included securities fraud, obstruction of justice, and conspiracy. Stewart pled not guilty, saying she had a standing order with Bacanovic to sell her shares if ImClone stock fell below $60. Stewart resigned as CEO and chairman of Martha Stewart Living Omnimedia on the same day she was indicted, but remained on the company's board.
The day after her indictment, Stewart took out a full-page advertisement in USA Today and launched a website with an open letter of defense "to my friends and loyal supporters." She said, "I want you to know that I am innocent—and that I will fight to clear my name... The government's attempt to criminalize these actions makes no sense to me... I am confident I will be exonerated of these baseless charges."
On the day she was indicted, the U.S. Securities and Exchange Commission filed a civil complaint against Stewart with charges of insider trading (for violating § 17(a) of the Securities Act of 1933, § 10(b) of the Securities Exchange Act of 1934, and SEC Rule 10b-5). The civil charges were stayed pending the criminal proceeding.
Read more about this topic: Im Clone Stock Trading Case
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