NEW YORK - Two friends of Samuel D. Waksal, the imprisoned founder and head of ImClone Systems Inc., were charged with insider trading yesterday after he testified against them before a grand jury.
Dr. Zvi Fuks, 68, chairman of the radiation oncology department at Memorial Sloan-Kettering hospital in New York, and Sabina Ben-Yehuda, 51, who worked at an investment fund founded by Waksal, were charged in a federal criminal complaint in U.S. District Court in New York.
Prosecutors said Fuks was on the scientific advisory board of ImClone, which makes the colon cancer drug Erbitux, when he received the inside information.
Waksal and homemaking entrepreneur Martha Stewart were convicted of crimes stemming from their sales of ImClone stock in December 2001, a day before the government's initial rejection of the cancer drug.
Fuks and Ben-Yehuda are accused of selling their shares after Waksal told them about the coming regulatory announcement, which sent the stock down 16 percent on Dec. 31, 2001, the first trading day after the FDA announcement.
The Food and Drug Administration approved the sale of the drug last year.
Waksal testified to a grand jury Feb. 2 that he told Ben-Yehuda on Dec. 27, 2001, that it was "highly likely" that ImClone's application for approval of the drug would be rejected by the FDA, the criminal complaint said. "Waksal told Ben-Yehuda that she should inform Fuks," the complaint said.
Ben-Yehuda sold her shares for $73,453, then gave the information to Fuks, who sold his stock for more than $5 million, the government's complaint said.
Waksal admitted to the grand jury during a post-arrest interview that he hadn't answered truthfully when representatives of the U.S. attorney asked him what he knew about the trades by Fuks and Ben- Yehuda, the complaint said.
"We believe these charges are entirely without merit, and we intend to defend against them vigorously," said Ben-Yehuda's lawyer, Stephen Fishbein of Shearman & Sterling LLP in New York. "We look forward to our day in court."
"Dr. Fuks is a distinguished physician," said Joel Cohen, a lawyer for Fuks at the New York law firm Stroock & Stroock & Lavan. "Sam Waksal has been convicted of perjury, and he has previously specifically denied that which he now alleges. It's a sad day, but Dr. Fuks is not guilty and will be vindicated."
Fuks and Ben-Yehuda were arrested yesterday and charged with securities fraud and conspiracy. If convicted, they could be sentenced to a maximum of 10 years in prison and fined a maximum of $1 million on the more serious charge, securities fraud, the U.S. attorney's office said.