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Former ImClone Systems CEO Samuel Waksal conspired to destroy documents and took other measures to obstruct a government probe into insider trading of the company’s shares, prosecutors charged Wednesday. In an indictment unsealed at U.S. District Court in Manhattan, Waksal is charged with obstruction, perjury and bank fraud, as well as the insider trading charges that led to his arrest on June 12. Wednesday’s indictment lays out the steps Waksal allegedly took to cover up his actions as a federal probe into alleged insider trading gathered steam. Regulators focused on the sale of millions of dollars in ImClone stock by Waksal’s father, Jack, and by his daughter, Eliza, just before the Food and Drug Administration refused to accept ImClone’s filing for the cancer-fighting drug Erbitux. In the criminal case brought against him on June 12, when he was arrested at his Manhattan home, prosecutors charged Waksal, 54, with conspiracy to commit securities fraud and perjury for lying to the Securities and Exchange Commission about a series of phone conversations he had with the two “tippees” on Dec. 27. Waksal’s formal indictment was delayed while the government’s investigation into the alleged cover-up continued and the two sides discussed a possible plea deal. Normally, prosecutors have 30 days in which to obtain an indictment following the filing of a criminal complaint, but the government obtained two, two-week extensions on the requirement. The latest deadline for filing an indictment was today. The indictment charges Waksal with obstructing the SEC investigation by agreeing with the two tippees, who allegedly sold more than $10 million in stock on his advice, to testify falsely before the agency in April, and by asking a third person to destroy documents and files the SEC has sought by subpoena. Waksal was also indicted in a scheme to defraud the Bank of America by securing loans by pledging ImClone stock that he no longer owned. All told, 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, and single counts of perjury, obstruction of justice and bank fraud. But the most explosive allegations concern the obstruction charge. As the SEC investigation accelerated in late January, Waksal allegedly directed another person to destroy records at the company, including computer files that held records of phone calls made by Waksal, and records for off-shore accounts kept by Waksal in Switzerland and the Netherlands. The phone messages, the indictment states, contained the identity of people who might have received inside information from Waksal. The information on off-shore accounts was sought by the SEC because it might have shown he was engaged in trading ImClone securities abroad, and could have helped locate assets owned by the former CEO that could be recovered in a civil action or in penalties for insider trading. The indictment states that on Dec. 26, hours after Waksal learned that the FDA was about to issue a letter refusing to accept a licensing application, he began phoning the tippees. It also charges that Waksal transferred almost 80,000 ImClone shares worth about $4.9 million to tippee No. 2, and then directed that the shares be sold. But that brokerage firm, Merrill Lynch & Co., refused to make the sale, the indictment charges, because of a “company-wide blackout in trading of ImClone stock” pending the FDA’s decision. Waksal’s attorney, Mark F. Pomerantz, could not be reached for comment.

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