You might not recognize Samuel Waksal’s name, but you’ve certainly heard of his friend Martha Stewart. In 2001, Mr. Waksal, the founder of ImClone Systems, got word that the Food and Drug Administration would reject his company’s application for approval of a new drug. Waksal allegedly warned Ms. Stewart, who sold 4,000 shares of the stock before the FDA announcement sent it plummeting.
In 2003, Waksal was sentenced to seven years, three months in prison, and told to pay more than $4 million in fines and back taxes. He was also banned from heading any publicly-held company for the rest of his life. Stewart received five months in prison, though this wasn’t for insider trading, but rather for lying about the suspicious stock sale.