Waksal returned profits
ImClone CEO paid nearly $500K in trading earnings amid concern on SEC rule.
February 21, 2002: 6:09 p.m. ET
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NEW YORK (CNN/Money) - ImClone CEO Samuel Waksal recently returned just under $500,000 in profits from trading ImClone stock to the company, just in case he violated a Securities and Exchange Commission rule regarding executive trading.
A spokesman for ImClone said Thursday Waksal has given a check to ImClone for $471,002 and has asked the board of the company to make an independent decision as to whether or not he violated the short-swing profit rule last year.
The short-swing profit rule states that if a company insider buys and then sells company stock within a six-month period, any profit must be returned to the company.
In April 2001, Waksal put 100,000 shares of ImClone stock into an exchange fund operated by Eaton Vance. Exchange funds let investors trade blocks of stock for shares in a more diversified fund, assuming it wants your stock. Instead of a tax benefit, it spreads risk without having to sell.
On Oct. 25 the fund had lost about half its value and Waksal liquidated his position, withdrawing the 51,532 ImClone shares that were left. At the time of liquidation the shares were worth a little less than $61.
Four days later Waksal tendered those shares, along with others, for $70 each to Bristol-Myers Squibb, which took a 20 percent stake in the company. That resulted in the profit of $470,002.
The gray area is whether of not the withdrawal of shares from the exchange fund technically counts as buying the stock, making the transaction subject to the short-swing profit rule.
According to the spokesman, Waksal is erring on the side of caution with this transaction, "considering the day and age."
ImClone (IMCL: down $1.12 to $16.77, Research, Estimates) has been hit with a number of class-action suits from investors alleging that Waksal made misleading statements concerning the approval process for its cancer drug Erbitux.
The company is also the subject of informal federal investigations.
ImClone recently adopted a shareholder rights program after financier Carl Icahn requested FTC clearance to buy about 15 percent of the company. 
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