The American Spectator

The Investor

The ImClone insider-trading case has to be the goofiest show running. Some day, I'm going to write a movie script about it. It will rival the Amy Fisher-Joey Buttafuoco story for tawdriness.

Is Insider Trading Worse If You Do It From a Private Jet?

It's December 27. Martha Stewart is on a private jet for a vacation in Mexico. On a refueling stop in San Antonio, she calls her office. They put her through to her broker's assistant, Kato Kaelin -- excuse me, Doug Faneuil. Faneuil says, "You better sell out of ImClone. Waksal's family is selling."

Faneuil works for Peter Bacanovic, one of Merrill Lynch's brokers to the stars. By all appearances, Faneuil is a suck-up and Bacanovic is one of those guys who works too hard on his tan. (He wasn't part of this December 27 call because he was on vacation in Miami.) Doug later pleads guilty to a misdemeanor, saying he gave the Feds false information in exchange for money, a plane ticket, and an extra week of vacation -- essentially, the tourist-class version of what Martha was doing at the moment she broke the law.

Martha is worth nearly half a billion dollars at this point, so the fate of 4,000 shares of ImClone aren't really that important to her. But an assistant puts her call through to Faneuil -- I wonder if that assistant still has a job -- so she says, "Sell."

The next day, after the market closed, ImClone says that the FDA just formally rejected its new-drug application for Erbitux. If Martha sold a day later, she would have made $65,000 less. That's a crime, but not a very serious one. Going back at least as far as 1987, I can't remember a high-profile criminal or civil insider trading case involving so little money. Whatever Sam Waksal did involved 100 times that amount. Whatever Ken Lay did involved 1,000 times as much. Whatever Bernie Ebbers did involved 10,000 times as much.

Nevertheless, the government will spare no expense to bring her down. In fact, one of the reasons Sam Waksal pled guilty without an agreement with the government -- which would have saved him a lot of jail time -- was that they probably wanted him to tattle on Martha, along with his daughter and father. There's a novel strategy: offer a deal to the guy who stole $10 million so you can nab the lady who stole $65,000.

Sam Waksal, the U.S. Attorney, and Family Values

OK, Sam Waksal is no prince. He has bounced checks, forged signatures, falsified research, raised money for Hillary Clinton, and left a long trail of angry employees and investors everywhere he has been. How is he the only person in this story who didn't make any money? All he did was try to save family members and friends from losing money. They deserved to lose that money, but it's hard to stay angry with someone for trying to protect them.

At the same time, this prosecution team hasn't laid a mitt on Sam Waksal's brother Harlan, now the CEO of ImClone. The feds blew a prosecution against Harlan for cocaine dealing back in 1981 because of an illegal search. Mighty forgiving of them to ignore him now, even though he sold $50 million in ImClone stock in early December, which is $50 million less than his guilty brother sold.

Unindicted Co-Conspirators

Waksal tipped his family and his friend, but who tipped Waksal? That criminal is going to escape without a scratch. Long before the FDA's December 28 rejection of ImClone's application, it knew it was going to reject it. The agency itself leaked the information on a selective basis.

A spokesman for the House Energy and Commerce Committee said back in June that someone at the FDA "inadvertently" provided information on the status of the application. (The New York Times reported that an FDA representative leaked this to Bristol-Myers Squibb, ImClone's marketing partner, and Bristol told ImClone on December 25.) The House spokesman later said the FDA told Bristol and ImClone in a December 12 conference call that it had "serious questions about ImClone's data and supporting documentation." Later still, the spokesman said ImClone met with the FDA on December 4 and indicated it might reject the company's application.

Except for the FDA, every government agency knows that its decisions constitute material information. Everyone but the FDA announces its decisions publicly or insists that companies doing business before it make instant disclosure. Supposedly, the FDA conducted an internal investigation about this matter. It doesn't appear anyone from the FDA is going to prison as a result.

Caste Party

I have high hopes for this as a movie project. Candice Bergen would be great as Martha Stewart, assuming Martha wouldn't want to play herself. For Peter Bacanovic, Robert Downey, Jr. or Rob Lowe would work just fine. If Kato Kaelin's wet-T-shirt judging schedule conflicts with the movie, David Spade could fill in and play Doug Faneuil. Tori Spelling would be perfect for Aliza Waksal, though I'd take the Osbornes as a group to play the Waksal family if they were available. Al Pacino and Woody Allen would play Sam and Harlan; you figure out who gets which role. Wally Shawn gets the role as the FDA guy.

My biggest problem is time. I can't possibly work on this until I run out of business topics. In this environment, it's looking like that won't happen until the year 9000.

topics:
Hillary Clinton, Business, Environment, Law, Energy