Former CEO of ImClone Systems arrested

Waksal accused of tipping off people about FDA's rejection of a highly touted cancer drug

? The former chief executive of ImClone Systems was arrested by the FBI on Wednesday and charged with tipping off two people to sell their stock in the biotech company a day before the FDA rejected its application for a new cancer drug.

Separately, the Securities and Exchange Commission brought civil charges against Samuel Waksal, accusing him of warning family members about the bad news regarding the highly touted drug, Erbitux. The SEC said the family then dumped more than $10 million in stock.

It said Waksal himself tried to sell 79,797 shares worth nearly $5 million, but brokerage firms would not take his business.

Waksal, 54, was charged with securities fraud, two counts of conspiracy to commit securities fraud and perjury for allegedly lying to the SEC about the tips. He faces up to 25 years in prison if convicted of all four charges.

Waksal was released on $10 million bail and did not speak to reporters as he left court. A federal magistrate ordered him to identify any money held overseas and return it to the United States by Friday.

Waksal’s lawyer, Mark Pomerantz, called the prosecution’s evidence “entirely circumstantial.”

“The government misread that evidence, and it overreacted in deciding to make today’s arrest,” he said.

The insider trading charges come three weeks after Waksal stepped down as head of the small New York company he founded in 1984.

ImClone’s fortunes are totally dependent on Erbitux, a cancer drug that looked so promising that it led to a big run-up in the company’s stock price. Company shares have plummeted by 90 percent since December.

Authorities said Waksal learned on Dec. 26 that the Food and Drug Administration would not consider ImClone’s application for Erbitux.