A physician credited with pioneering cancer treatment research and another friend of jailed ImClone Systems Inc. founder and former Chief Executive Samuel Waksal were charged Wednesday with securities fraud in the same stock scandal that brought down Martha Stewart.
Zvi Fuks, 68, chairman of radiation oncology at Memorial Sloan-Kettering Cancer Center in Manhattan, and Sabina Ben-Yehuda, 51, an Israeli citizen living in New York City, were arrested on charges stemming from sales of ImClone stock on Dec. 27, 2001.
Prosecutors alleged Fuks, a former member of ImClone's scientific advisory board, and Ben-Yehuda made the sales after they were tipped by Waksal that the U.S. Food and Drug Administration would not review ImClone's experimental cancer drug, Erbitux.
Stewart, 63, sold 3,928 shares that same morning; prosecutors said she had been tipped that Waksal was selling. The homemaking maven was convicted of lying to federal investigators and served five months in prison. She was released last week.
Waksal, 56, is serving a seven-year sentence in federal prison after admitting he tipped his daughter to sell her ImClone shares. Aliza Waksal was not charged with a crime.
In a criminal complaint unsealed Wednesday in U.S. District Court in Manhattan, the government charged Fuks and Ben-Yehuda with conspiracy to commit securities fraud and securities fraud.
The Securities and Exchange Commission Wednesday also brought civil charges in federal court in Manhattan against Fuks and Ben-Yehuda to force them to give up profits and pay interest and penalties.
"Dr. Fuks is a distinguished physician," said Joel Cohen, a lawyer for Fuks. "Sam Waksal, convicted of perjury, previously denied precisely what he now alleges. Dr. Fuks is not guilty and he will be vindicated."
A lawyer for Ben-Yehuda did not immediately return a telephone message for comment.
According to the complaint, Waksal learned the disappointing news about the FDA and Erbitux on the evening of Dec. 26, 2001.
The complaint alleged, Waksal tipped Ben-Yehuda about the FDA news and that it would negatively effect ImClone stock.
According to the complaint, Ben-Yehuda asked whether she should tell Fuks the news and Waksal said she should.
Before the market opened the next day, Fuks placed an order to sell $5.3 million in ImClone stock and Ben-Yehuda placed an order to sell $73,453 of the stock from her accounts, prosecutors said.
After the FDA development was announced, the value of ImClone stock fell by about 16 percent.
Waksal later spoke to Fuks, who told Waksal that he had sold all of his ImClone stock after speaking with Ben-Yehuda and thanked Waksal for making sure he was taken care of, the complaint alleged.
Waksal revealed the details of the discussions during testimony before a federal grand jury on Feb. 2, according to the complaint. He admitted also that he had not been truthful about his dealings with Ben-Yehuda and Fuks when he was interviewed by investigators after his arrest and that he had no expectation that his current cooperation would result in a reduced prison sentence, the complaint said.
If convicted, Fuks and Ben-Yehuda each would face a maximum of 10 years in prison on the most serious charge and maximum fines of $1 million or twice the value of their gains from any crimes.
A June 2004 news release announcing the appointment of Fuks to lead Memorial Sloan-Kettering's radiation oncology department said he had served as chairman from 1984 to 1998. It said during those years he had helped to develop "highly precise radiation delivery techniques that have changed the practice of clinical radiology worldwide."
It added, "The techniques have led to important advances in the ability to cure tumors using radiation therapy."
Christine Hickey, a hospital spokesperson, declined comment but said "It's a private matter."
David Pitts, an ImClone spokesman, said the company had no comment.