A federal judge in New York Tuesday sentenced the former executive of a drug company called ImClone to more than seven years in prison for an insider trading scheme. The case has allegedly entangled America's best known home decorator, Martha Stewart.
U.S. District Judge William Pauley had some harsh words for former ImClone chief Sam Waksal in meting out the maximum sentence. He said by his "lawlessness and arrogance" Waksal undermined confidence in corporate America.
Waksal had earlier pleaded guilty to half a dozen criminal charges related to insider trading in the company stock, perjury, bank fraud and obstruction of justice. He was ordered Tuesday to pay more than $4-million in fines and back taxes and to serve 87 months in prison with no possibility of parole.
Waksal is the highest ranking executive sentenced to prison following a series of corporate scandals. The judge told Waksal he abused his position and brought harm to the company, its employees and shareholders and investors in general.
Senior executives from several other large U.S. companies are also facing criminal charges for their alleged misconduct. Columbia University Business School Professor John Whitney says the ImClone ruling may indicates the courts are beginning to take corporate wrong-doings very seriously.
"I don't think it will be an historic case, I think it will be a watershed case. But I have a hunch that other senior executives, as the cases are made in some of these other infamous companies, will probably get greater sentences," he said.
In ImClone's case, Waksal admitted to trying to sell ImClone stock and urging his daughter to do the same after discovering that the U.S. Food and Drug Administration would not consider the company's cancer-drug application in December 2001.
Last week, Waksal's friend, multi-millionaire home decorating star Martha Stewart, was indicted on charges of securities fraud and obstruction of justice for alleged insider trading when she sold four-thousand shares of ImClone.
Columbia University's John Whitney says the judge's harsh sentence, despite Waksal's emotional apology, underscores recent efforts to restore public trust and promote honesty in corporate America.
"I do believe that this will cause people to sober up a little bit. And I have a hunch there might be some executives who transgressed who may not sleep so well tonight," he said.
Mr. Whitney says if Waksal, along with other alleged corporate wrongdoer, admit to their crimes early on, then the courts would probably hand down lighter sentences.