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ImClone Chief Waksal's Guilty Pleas Unusual

Sam Waksal, the former head of ImClone Systems, pleaded guilty to six charges Tuesday in federal court.

His pleas are unusual in several respects. He has no plea agreement with the Government. He has not cooperated with the Government in exchange for a lesser sentence. There are still seven counts pending against him that the Government may pursue. And the Government has said it may add even more charges.

Why would Waksal plead guilty under such circumstances? We think this analysis in the Washington Post article by John Coffee, a securities-law expert at Columbia University, probably comes closest to the mark:

"John Coffee, a securities-law expert at Columbia University, said that if Waksal had pleaded guilty to the conspiracy counts included in an August indictment he may have been forced to admit passing on material information, implicating his father and daughter in an insider-trading scheme. "I think he can't decently send his parent or his child to prison. I don't think you have to go any further to understand his motivations," Coffee said."

"Coffee said Waksal could get significant jail time based on his guilty pleas. "This is legally not a tactically wise decision, but it is a very human decision," he said."

We also agree with those legal analysts who say it is unlikely Waksal will provide information against Martha Stewart. He may not have any incriminating information about her, or he may not want to give it up. Or the Government may have told him he can't cooperate selectively, giving up some targets but not others. It appears to us that the Government is not offering Waksal anything unless he incriminates his entire family--not even an assurance that his 80 year old father won't go to jail, which is undoubtedly why he wouldn't plead to the count involving his father today.

Waksal's son is likely going to prison, but his daughter, Aliza, may be spared as Waksal said in court today his daughter had no knowledge of his reasons for advising her to sell her stock.

Waksal pleaded guilty to two counts of securities fraud, and one count each of conspiracy, obstruction of justice, perjury and bank fraud. Under the federal sentencing guidlines, he could receive between six and nine years in prison. Waksal and the Government disagree about the facts supporting the bank fraud case which means the Judge will decide that issue at a sentencing hearing.

Both ImClone's and Martha Stewart's stocks rose today.

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