Martha Stewart Scandal

IMCLONE SYSTEMS INC

• Leading Biopharmaceutical Company

• Focus on research and development to improve cancer care

• Founded in 1989• Research Headquarters in New York

with operations in Europe • Acquired by Eli Lilly and Company in

2008

Timeline

•Oct. 31, 2001: ImClone Systems asks the government to review Erbitux, its

new cancer drug.

•Dec. 26, 2001: ImClone founder Sam Waksal is tipped that the government

will deny the company's Erbitux application, then tips his daughter to sell her ImClone stock and tries to sell

his own.

•Dec. 27, 2001: Stewart sells all 3,928 shares of ImClone stock she owns. The

government later contends she was tipped that Waksal was trying to sell

his shares.

•June 12, 2002: Waksal is arrested and charged with insider trading. Stewart issues a statement repeating her assertion that she had a $60 stop-loss order.

•June 18, 2002: Stewart insists she is "fully" cooperating with authorities. •Oct. 2, 2002: Former Merrill Lynch & Co. assistant Douglas Faneuil pleads guilty to taking a payoff to keep quiet about the Stewart stock trade.

•June 5, 2003: Stewart unveils a personal Web site in which she proclaims her innocence and insists she will fight to clear her name. •June 10, 2003: Waksal is sentenced to more than seven years in prison. •Nov. 7, 2003: Stewart tells ABC News she is scared of prison but "I don't think I will be going to prison, though."

•Feb. 27: Judge throws out securities fraud count against Stewart. The charge accused her of deceiving investors in her own media company by claiming she sold ImClone because of the $60 agreement. •March 3: Jury begins deliberations. •March 5: Stewart convicted on all charges; Bacanovic convicted on all but one charge, making a false statement.

Convictions

• Convicted of obstruction of justice• Making false statements to investigators and

conspiracy as part of an insider trading scandal

• Conspiracy

Evidence• Message log: The government showed jurors a computer

log of a phone message from Bacanovic to Stewart on Dec. 27, 2001, that read: "Peter Bacanovic thinks ImClone is going to start trading downward." Armstrong testified Stewart changed it to "Peter Bacanovic re imclone," but then immediately told her to change it back to the original wording.

• Worksheet: The government introduced a worksheet prepared by Bacanovic that showed stocks Stewart owned in December 2001. There are many handwritten marks on the sheet, but a national ink expert testified a mark of "@60" by an entry for ImClone was in a different ink. The government claims Bacanovic doctored the worksheet to support his story that he and Stewart had agreed to sell ImClone when it fell to $60 per share.

• Stock chart: Jurors saw stock charts for Martha Stewart Living Omnimedia that showed spikes in price when Stewart issued statements on June 12 and 18, 2002, claiming her ImClone sale had been proper and insisting there was a $60 agreement. The chart is central to the government's contention that Stewart was deliberately trying to protect her wealth by propping up her company's stock price.

Martha Goes to Jail

• Sentenced in July 2004 to:• 5 months in a federal

correctional facility• 2-years of supervised release

including 5 months of electronic monitoring

• Served jail time at Federal Prison Camp in Alderson, West Virginia from October 2004 to March 2005• Initially refused to serve at FPC

due to its “remote location”

Lessons Learned and Perspectives

on Scandal

Sourceshttp://www.imclone.com/