|Kadmon's Sam Waksal
Sam Waksal, the once-jailed former CEO of ImClone, is again the subject of fraud accusations as a former associate says he bailed on an investment deal designed to circumvent his punishment and defaulted on a $15 million promise.
Back in 2010, Waksal, who is forever banned from serving as an officer of a publicly traded company, was plotting an IPO for Kadmon, his post-prison biotech startup. According to a federal lawsuit, he reached out to Anastasios Belesis, founder of the now-shuttered John Thomas Financial, with a deal to trade 1 million shares of Kadmon for $1.
But Waksal never handed over the shares in full, the suit alleges. In 2012, Kadmon's general counsel came to Belesis with a make-good offer: If the investor renounced his interest in Kadmon and any claims against its founder, he'd get $15 million, according to the lawsuit. The idea, Kadmon's attorney said, was to get the deal done quietly and avoid any mandatory disclosures to investors, skirting Waksal's lifetime ban, Belesis alleges.
The $15 million never came, either, according to Belesis, and now he wants either the money or the previously promised 1 million Kadmon shares.
The alleged fraud began as Waksal was still under supervised release after a 5-year stint in federal prison for his role in an insider trading scheme. In 2003, the former ImClone CEO pleaded guilty to informing friends and family that Erbitux, the biotech's chief asset, had been rejected by the FDA before that information was public, igniting a scandal that would eventually send Martha Stewart to federal prison.
Beyond accusing Waksal of defaulting on a promise, Belesis' lawsuit paints Kadmon as an organization deliberately running afoul of the law. In an email attached as evidence, a Kadmon attorney spells out that, while "we are still thinking the mechanism through," the $15 million payment would serve as "compensation for (Belesis') personal assistance to Sam in trying to work around Sam's" lifetime ban, and the CEO would put the money from his personal fortune.
Kadmon had largely operated under the radar since its foundation in 2009. The company raised a reported $500 million in equity and built out its pipeline through a series of quiet deals, and Waksal told CNBC last year that the next step was an IPO. His promise of a filing by year's end never came to fruition, but the company still plans to find its way to Wall Street. Last month, Kadmon unveiled plans to spin off its gene therapy assets into a standalone company.
- read the complaint (PDF)