NEW YORK -- The seven-year prison sentence for ImClone Systems founder Sam Waksal sends a message that his friend Martha Stewart won't get off easy if she is convicted in the insider-trading scandal, legal experts said yesterday. The harsh sentence imposed on Waksal, who was also ordered to pay more than $4.2 million US, could increase the chances that the indicted guru of gracious living will try to avoid prison time with a plea bargain, one expert said.
"This has to be in the back of Martha's mind," said David Marder, a former U.S. Securities and Exchange Commission lawyer. "What we're seeing here is the judges being willing to impose harsh sentences" for white-collar criminals.
Waksal was sentenced to seven years and three months in federal prison after admitting he tipped his daughter to sell ImClone stock ahead of a negative government report about the ImClone cancer drug Erbitux.
The punishment was the maximum under federal guidelines used by judges to determine sentences, and U.S. District Judge William H. Pauley scolded Waksal for hurting his family and the confidence of investors nationwide.
Stewart is accused by federal prosecutors of selling her own ImClone shares on Dec. 27, 2001, because she received word from her stockbroker the Waksals were trying to sell. She has pleaded innocent.
The Waksal sentence is significant because it sets a harsh tone for the corporate executives who stand accused in the wave of white-collar scandals that have unfolded since the fall of U.S. energy giant Enron in 2001, legal experts said.
"The public is tired of seeing CEOs and high-profile executives getting slaps on the wrist, and this judge is sending a message that it's not going to be that way anymore," Marder said.
That message likely was not lost on Stewart, a longtime friend of Waksal, said Frank Razzano, a former federal prosecutor and assistant chief trial lawyer for the SEC.
"I think what it says is if she's convicted of these crimes, she's going to do time in jail," Razzano said.
If Stewart's lawyers are seeking a deal with federal prosecutors, they have not tipped their hand. The public face of Stewart's defence has been an aggressive campaign designed to convince people that she is innocent.
It includes a Web site, updated almost daily, featuring e-mails from fans who have taken her side, a list of what Stewart says are media distortions about the case and an open letter from the style guru herself.
Anna Cordasco, a Stewart spokesperson, declined to comment on the sentence.
There is no guarantee any judge will follow the path laid by another. Stewart's case is assigned to U.S. District Judge Miriam Goldman Cedarbaum, who would determine her sentence if prosecutors win a conviction. Still, the cases against Stewart and Waksal, as sketched out by federal prosecutors, have some similarities.
Prosecutors say Waksal saved his daughter about $600,000 US by tipping her off, and they say Stewart saved about $45,000 by dumping ImClone early -- a far cry from the multimillion-dollar fraud at Enron.
But in both the Stewart and Waksal cases, prosecutors say the defendants compounded their crimes by lying to investigators.
