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An emotional portrayal of Samuel Waksal as a humanitarian who acted rashly and then suffered much for the insider-trading scandal at ImClone Systems Inc. ran into the federal sentencing guidelines and a Southern District of New York judge Tuesday. Turning aside pleas for a downward departure under the guidelines by defense attorney Mark Pomerantz, Judge William Pauley sentenced the ImClone founder to 7 years and 3 months in prison, the maximum under the guideline range. The judge said Waksal demonstrated a “pattern of lawlessness and arrogance” in covering up his attempt to unload millions in company stock on the eve of bad news from regulatory authorities on the application for the cancer-fighting drug Erbitux. The guidelines called for a range of between 70 months and 87 months, and the judge rejected the request of Assistant U.S. Attorney Michael S. Schachter for a sentence more severe than 87 months. But Schachter was persuasive in arguing that Waksal’s numerous good works were no excuse for his crimes and were not so extraordinary that they justified a departure from the “heartland” of cases contemplated by the guidelines. The insider trading, Schachter said, violated Waksal’s “sacred trust with shareholders,” and sent the “message to investors that the game is rigged.” “There is no dispute that he has done some good things and helped a lot of people and nothing can take that away from him,” Schachter said. “But, judge, that does not entitle him to a reduced sentence.” The hearing concluded eight months of jockeying between Schachter and Pomerantz over the appropriate sentence for Waksal, who entered a guilty plea on Oct. 15 to securities fraud, perjury, obstruction of justice, bank fraud and conspiracy. He later pleaded guilty on March 3 to wire fraud and conspiracy to commit wire fraud for avoiding New York state sales tax by routing the purchase of valuable artworks through New Jersey. The first wave of charges dealt with the period of Dec. 26 through Dec. 28, when Waksal learned of the regulatory setback regarding ImClone, told his daughter Aliza to sell 39,472 shares and then tried unsuccessfully to transfer 79,797 shares to her account for sale. Waksal, 55, also made $130,129 in illegal profits through the purchase of put options on ImClone, betting that the share price would decline. Then came the coverup, as Waksal persuaded his daughter to lie to investigators, lied himself to the Securities and Exchange Commission, and instructed ImClone employees to destroy documents. Pomerantz made five arguments for a downward departure to take the sentence below 70 months, or at least keep the sentence at the low end of the 70-to-87-month range. Pomerantz, a former prosecutor, cited Waksal’s exceptional community service and charitable works, said he received little financial benefit from the sales, and cooperated with the government in three days of frank discussions with prosecutors and the SEC. Pomerantz also argued that Waksal had resigned from ImClone and suffered constant media attention and public ridicule over the scandal, and that a sentence within the guideline range would be greater than those meted out to other white-collar criminals. LENIENCY ARGUMENTS DISMISSED Judge Pauley dismissed each argument in turn, saying Waksal gave relatively little to charity considering his fortune and position as a member of New York’s “social, political and financial elite.” The judge added that “the lack of personal profit is not grounds for departing” under the guidelines. The judge noted that the calculation of 70 months to 87 months took into account Waksal’s acceptance of responsibility and his discussions with regulators and prosecutors after his guilty plea did nothing to “break the logjam” in an ongoing investigation. The investigation by the Southern District U.S. Attorney’s Office also overtook Waksal’s friend Martha Stewart, who sold ImClone stock shortly before the bad news about Erbitux was made public. Stewart was indicted last week for conspiracy, obstruction of justice and securities fraud, but not insider trading. She has pleaded not guilty. As for leniency based on Waksal’s resignation from ImClone and the barrage of media attention since the scandal came to light, Judge Pauley said the argument “borders on the frivolous” because Waksal sought out publicity for years, and the media scrutiny was “a collateral consequence he alone had brought down on himself.” “The serious crimes to which you pleaded guilty are not simply the result of a 24-hour window of catastrophically poor judgment or crimes of impulse,” he said. Pomerantz worked to put the case in perspective, expressly asking the judge to view Waksal’s crimes in the context of other corporate scandals of the last two years. Unlike the Enron, WorldCom and Adelphia outrages, he said, Waksal’s actions did not result “in the bankruptcy of an entire company or the wholesale loss of jobs.” He also asked the judge to consider the small amount of stock that changed hands in light of Waksal’s ownership of some 3 million shares of ImClone, saying, “He never felt a lack of confidence in ImClone or Erbitux.” “This was not the cynical act of a corporate insider who knows his company is really a house of cards,” Pomerantz said. Waksal gave a brief statement to the court, apologizing “to all the people who had confidence in me and whose confidence I betrayed.” But Judge Pauley was unpersuaded. He ordered Waksal to pay nearly $1.3 million in restitution for the tax avoidance and a $3 million fine. He then said the defendant would remain confined to his Manhattan apartment on electronic monitoring until his sentence begins July 2. The judge told Waksal, “You abused your position of trust as the chief executive officer of a major corporation and undermined the public’s confidence in the integrity of the capital markets.” “Then you tried to lie your way out of it,” the judge said. Waksal requested that he serve his sentence at the Eglin Prison Camp in Florida.

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