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Waksal Sentenced to Prison, High Fines; Interview With David Novak
Aired June 10, 2003 - 20:01 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDERSON COOPER, CNN ANCHOR: We're starting the hour with this corporate big-wig who could have gotten 75 years in prison, instead a judge sentenced former ImClone CEO Sam Waksal to seven years, three months, with no parole, a $3 million fine and another $1 million or so in back taxes. Waksal was at the center, of course, of an insider trading scandal that ensnared, among others, Martha Stewart. Allan Chernoff starts our coverage.
ALLAN CHERNOFF, CNNfn CORRESPONDENT (voice-over): Sam Waksal walked into court hoping his career of pursuing a break-through cancer drug might merit a lenient sentence. Defense attorney Mark Pomerantz described Waksal as a man of good deeds, whose insider trading was a spur of the moment crime, not that as an executive who planned to cash out.
Quote, "If you could turn back the clock and erase his crimes, but you also had to erase his drug, it is not a deal he would make," Pomerantz said.
Waksal rose in his own defense, apologizing to his family. His 80-year-old father, Jack, a holocaust survivor, wept in the front row. Then Waksal addressed cancer patients. "I am so sorry for any delay I may have affected as a result of my actions."
Judge William Pauley rejected all arguments for leniency, telling Waksal his good acts were not extraordinary for a chief executive in New York City, adding Waksal had contributed only one-half of 1 percent of his income to charity during a period when he earned $133 million.
Waksal's sentence, seven years, three months in prison, a fine of $3 million, plus $1.2 million in back taxes. Waksal as well as his family left the court without comment.
(on camera): Judge Pauley called Waksal's downfall tragic, especially in light of the latest news on the drug Erbitux. Based on new trial data, the Food and Drug Administration is planning to give the drug a second look for possible approval, meaning Sam Waksal's greatest success may come once he is behind prison bars.
Allan Chernoff, CNN, New York.
COOPER: One of the insiders Waksal allegedly tipped off was his friend Martha Stewart. So what happens to her now as well as Waksal's company ImClone? Who better to ask than our own financial news guru, "MONEYLINE"'s Lou Dobbs? Lou, thanks for being with us.
LOU DOBBS, HOST, "MONEYLINE": Good to be with you.
COOPER: What does this mean for Martha Stewart's case?
DOBBS: At this point she stands in a somewhat similar position to Waksal's family if indeed the allegations are true that there was a communication between Waksal and Stewart. As you noticed, there was no fallout, if I may use the expression, with that emblazoned across the screen as you and I are talking, toward the family members who sold stock at the same time that Waksal did.
COOPER: Do you think prosecutors were in anyway trying to send a message to Martha Stewart with their sentencing of Waksal?
DOBBS: Not with the sentencing today, Anderson. This is a message to everybody. This is a very top sentence by a tough judge, Judge Pauley stepping right up and throwing the book. We've seen long sentences handed down in previous cases though. And they're commuted, -- well, not commuted, but at least shortened, usually by a significant amount of time. We'll have to wait and see what happens here. But this is a strong sentence against Sam Waksal.
COOPER: Let's talk about his company a little bit. What happens to ImClone now?
DOBBS: Well, ImClone is a mystery at this point to everyone. Allan Chernoff just reported that there has been some promising developments, primarily through European trials, on this cancer drug Erbitux.
But one of the great, terrible things about this is that Erbitux is just -- we don't understand it yet. And because of the way Waksal ran this company, FDA trials were delayed, botched. And at this point we just really can't make a judgment.
It would be really, I think, incorrect of any of us to suggest that Erbitux right now appears to be a success. It's much too early, and there's great doubt as well as great hope here.
COOPER: How's the Street feeling? I mean are analysts staying away from ImClone?
DOBBS: Yes, they are. Yes they are. But as we know, analysts are not always right, or always to be regarded on this.
COOPER: And the latest on Erbitux. You mentioned there has been some promising news. But it's at this point still kind of up in the air?
DOBBS: I think it's a very mixed picture. It's a very -- you know obviously we're all hopeful. But even if it is -- it turns out to be as promising as some would suggest, this will not have a great impact on the revenue and the earnings of the company over time. It's really -- we've seen the stock price go from the 60s now to the 30s although it was much lower earlier. So there's still a lot of perhaps misplaced euphoria about the stock price.
BROWN: All right, Lou Dobbs, thanks very much.
DOBBS: Good to be with you, Anderson.
COOPER: Well if nothing else, today's sentencing should mean corporate boardrooms will get the message don't get caught. That isn't something you can put in a memo.
In Portland, Oregon to talk about when white collar criminals go to jail is David Novak. He's the author of a book called "Downtime: a Guide to Federal Incarceration." David, thanks for being with us.
Sam Waksal's attorney has asked that his client go to the place, I guess, some people call the original "Club Fed". Tell us about this location where they want him to go.
DAVID NOVAK, AUTHOR, "DOWNTIME": Dr. Waksal's attorney requested a judicial recommendation for Federal Prison Camp Eglin which was actually opened in 1962 by the Bureau of Prisons, and, as urban legend has it, is the facility for which the term Club Fed was actually coined.
COOPER: What kind of a facility is it? What is it like? What is life there like for a prisoner?
NOVAK: Being a minimum security federal prison camp, there are no barbed wire fences or concertina wire. Prisoners that are housed in that facility spend eight hours a day, five days a week working in some menial capacity, generally in support of the infrastructure of the Air Force base or the prison itself.
COOPER: I was going to say, we were just looking at images of, I guess, Air Force troops or Army soldiers. I guess that's why it's actually part of a larger Air Force base?
NOVAK: That's correct. In fact, Eglin is located on a corner of Eglin Air Force Base. And approximately 600 to 800 inmates every day are bused out on the base to mow the lawns, actually.
COOPER: You know people hear Club Fed, is it that cushy? What is life like? Are there bunk beds? Are there single rooms? What is the day-to-day life like?
NOVAK: Dr. Waksal, if he's housed at Eglin, is going to actually to be sleeping in a dormitory. There are five dormitories at Eglin, each capable of housing about 200 men. Picture, if you will, a basketball court housing several hundred men and that's the density of population in two-man cubicles that the doctor will find himself in the next month or two.
COOPER: You advise a lot of clients who are facing time. What do you tell them? The adjustment from being a CEO of a major corporation to doing time and having every decision you can make taken away from you. What is that process like?
NOVAK: Well, it's emotionally excruciating. Certainly any of us could begin to imagine that.
But the most important thing I counsel my clients about is, No. 1, accept responsibility for the position you find yourself in. As clearly as judge Pauley pointed out to the doctor today, it is his fault.
Secondly, learn to mimic other people. People from the higher socioeconomic standing who find themselves in such a dense, loud population also have trouble adjusting. But you know the human animal's incredibly adaptive. So I'm sure he'll do fine.
COOPER: And obviously, fame brings its own set of difficulties in prison. I mean someone like Martha Stewart, a well-known face, suddenly if she is found guilty, if she is sentenced to time, what kind of burden does fame bring with it?
NOVAK: That's a very good point, Anderson. In fact, it will bring a bit more notoriety. You certainly get more attention from staff which is not necessarily something you would like. And you're put in a position where you are judged by the letter of every rule.
So Miss Stewart, as an example, would probably be judged a bit more harshly, than, say, a female who came from Danbury, Connecticut, as an example, and was a tax cheat.
COOPER: All right, David Novak, thanks a lot for joining us. Appreciate it.
NOVAK: My pleasure, Anderson.
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