The window in which Samuel Waksal destroyed himself was about forty-eight hours wide. On December 26, 2001, the chief executive of ImClone Systems learned through company channels what the Food and Drug Administration would make official two days later: the agency was refusing even to review the application for Erbitux, the cancer drug on which ImClone’s entire two-billion-dollar valuation — and Waksal’s entire leveraged, art-hung, celebrity-crowded life — depended. What Waksal did next was not sophisticated. He did not construct offshore entities or launder trades through derivatives. He got on the phone. He tipped his daughter, who sold. Family members sold. He tried frantically to dump nearly eighty thousand of his own shares, transferring them to his daughter’s account when his own brokers balked — and the brokers’ refusal to process the sales is the only reason his losses avoided being even more crimes. And in the pandemonium of that December 27th, his stockbroker’s office at Merrill Lynch placed a call to another client, vacationing en route to Mexico, with a message that would eventually be parsed by two juries: the Waksals are selling. The client was Martha Stewart. She sold 3,928 shares, avoiding a loss of about $45,000 — roughly what her company generated in revenue every few minutes — and the resulting cover-up would cost her a criminal conviction, five months in a West Virginia prison camp, and a temporary crown as the era’s most improbable felon.

The Charmer

Sam Waksal was not a banker who stumbled into science; he was a scientist who stumbled, gloriously and then catastrophically, into money. Born in 1947 to Polish Holocaust survivors who settled in Dayton, Ohio, he earned a doctorate in immunology and worked at genuine institutions — Stanford, the National Cancer Institute, Tufts, Mount Sinai — though his academic career was trailed by disputes and departures that a less charming man would not have outrun. Charm was the constant. In 1984, he and his brother Harlan, an emergency-room physician, founded ImClone Systems in a former shoe factory on Varick Street in SoHo, and for a decade and a half it was one of biotech’s ordinary strugglers — burning cash, pivoting between projects, staying alive on Sam’s preternatural gift for raising money. He became a fixture of a particular Manhattan ecosystem: the scientist among socialites, host of salon parties where artists, actresses, and financiers mingled under museum-grade paintings, friend of Mick Jagger and Carl Icahn, escort of Patricia Duff, boyfriend at one point of Martha Stewart’s daughter, Alexis. He lived, by his own later admission, perpetually beyond his means — borrowing against everything, including, in the end, the truth.

The company’s salvation arrived from academic oncology. Erbitux — cetuximab — was a monoclonal antibody, based on research by Dr. John Mendelsohn, that blocked a growth-factor receptor on certain tumors; in trials it showed real promise against advanced colorectal cancer in patients who had exhausted other options. Waksal, a genuine believer as well as a promoter, declared it the future of cancer therapy, and in September 2001 he closed the deal of the biotech decade: Bristol-Myers Squibb agreed to pay roughly two billion dollars for a stake in ImClone and rights to the drug — a transaction that showered near-term riches on insiders who tendered shares and made ImClone, briefly, the envy of the industry. All of it rested on a single regulatory event: F.D.A. acceptance of the Erbitux application. And the application, as ImClone’s own people knew and as the agency had been signaling for months, was a mess — the pivotal trial’s design and documentation were so deficient that on December 28, 2001, the F.D.A. issued a refuse-to-file letter, declining even to formally consider the data. The stock, seventy-five dollars in early December, was on its way to the teens.

The Tips

The S.E.C. and federal prosecutors reconstructed the last week of December 2001 phone log by phone log, and the record they assembled was devastating precisely because it was so domestic. Waksal, learning of the coming refusal on the 26th, called family. His daughter Aliza sold roughly $2.5 million of ImClone stock on the morning of the 27th. His father, Jack, an eighty-year-old survivor of the war, sold millions more, and prosecutors alleged the tip travelled onward within the family. Sam himself ordered his brokers to unload his shares; Merrill Lynch and Bank of America, smelling exactly what was happening, refused to execute — compliance departments, for once, functioning as designed. When the story broke and the investigations began, Waksal compounded everything in the classic manner: he lied to the S.E.C. under oath about his calls, and he attempted to obstruct the inquiry — conduct that transformed a disastrous week into a comprehensive indictment. Investigators also discovered an entirely separate fraud: to sustain his cash-devouring life, Waksal had forged the signature of ImClone’s general counsel on documents pledging ImClone stock he did not own as collateral for a $44 million bank loan. And, almost as an afterthought, he had dodged more than a million dollars in New York sales taxes on roughly fifteen million dollars of art — a Mark Rothko among the purchases — by having empty boxes shipped to New Jersey while the paintings went to his SoHo loft.

He was arrested at dawn on June 12, 2002, in the same season that brought the perp walks of Adelphia’s Rigases and WorldCom’s executives, and the government made clear it intended ImClone to be exemplary. On October 15, 2002, Waksal pleaded guilty to six felonies — securities fraud, bank fraud, conspiracy to obstruct justice, and perjury — without a cooperation agreement, an unusual posture widely understood at the time as a refusal to testify about his family and friends. The following spring he added the guilty plea for the art-tax scheme. On June 10, 2003, Judge William H. Pauley III sentenced him to eighty-seven months in federal prison and ordered more than four million dollars in fines and restitution, telling him from the bench that the harm he had done reached beyond his investors to the integrity of the markets and to cancer patients’ hopes. He was, the newspapers noted, the first chief executive of the great corporate-scandal era to receive a prison sentence — ahead of Ebbers, ahead of the Enron men — and he served the bulk of it at Schuylkill, in Pennsylvania, inmate No. 53803-054. The S.E.C. separately banned him for life from serving as an officer or director of a public company.

Congress performed its own autopsy while the criminal case was young. In the summer of 2002, the House Energy and Commerce Committee’s investigations subcommittee held hearings on the ImClone affair, and its investigators produced the timeline — the calls, the trades, the transfers — that shaped every proceeding after. Waksal appeared and, on advice of counsel, declined to answer. The hearings established something the trading charges alone could not convey: that the F.D.A.’s concerns about the Erbitux application had been communicated to ImClone repeatedly during 2001, even as the company’s public statements and its chief executive’s personal salesmanship ran at full optimism into December. Bristol-Myers Squibb, which had committed two billion dollars on the strength of that optimism, was left to write down its investment and renegotiate the partnership from wreckage; Harlan Waksal took over the company his brother had made radioactive, and was in time himself eased out. The S.E.C., alongside its case against Sam, pursued the family trading civilly, and the settlements that followed — including payments by his father — closed the loop on the December telephone tree. It was, viewed from the agency’s side, a nearly perfect enforcement record; viewed from the market’s side, it was a reminder that every element of it was reconstruction after the fact, assembled only because the collapse was loud enough to demand it.

The Homemaker

The strangest property of the ImClone scandal is that its most famous casualty was never convicted of insider trading at all. Martha Stewart’s December 27th sale — executed after her broker Peter Bacanovic’s assistant, Douglas Faneuil, passed along the news of the Waksal family’s selling — sat in a genuine legal gray zone: she was not an ImClone insider, and the misappropriation theory that might have reached her conduct was uncertain enough that the government never criminally charged the trade itself. What it charged was the aftermath. Stewart and Bacanovic, investigators concluded, concocted a cover story — a supposed standing agreement to sell if the stock fell below sixty dollars — and repeated it to federal agents, with Faneuil first corroborating and then, conscience-stricken and facing his own exposure, recanting and testifying. In March 2004, a jury convicted Stewart of conspiracy, obstruction, and false statements; she served five months at the Alderson federal camp and five more confined to her estate, her company’s stock gyrating with every development. The case became a national Rorschach test — a righteous demonstration that the famous lie to the F.B.I. at their peril, or a trophy prosecution of a self-made woman for a cover-up of a non-crime, pursued while the architects of vastly larger frauds negotiated their surrenders. Both readings were argued at full volume; both contain more truth than their partisans concede.

The Punch Line

Waksal himself, uncharacteristically for the genre, said the quiet part on national television. In an interview broadcast on 60 Minutes before he surrendered to prison, he admitted the insider tipping, called his conduct inexcusable, and groped toward an explanation that remains the most quoted sentence of the affair: that he had made terrible mistakes, that the lines he crossed had presented themselves at a moment of desperation and he had “rationalized” his way over them. It was a confession striking for what it lacked — the usual counter-narrative, the claim of prosecutorial excess — and observers divided over whether it represented rare candor or the final, most sophisticated product of a lifelong charm offensive: the con man’s last market being contrition. Judge Pauley, at least, had been unmoved by the performance of remorse; the sentence he imposed sat at the top of the guidelines range the parties had contemplated.

On February 12, 2004 — three weeks before Stewart’s conviction, eight months into Waksal’s sentence — the Food and Drug Administration approved Erbitux for advanced colorectal cancer. The drug worked. The refusal of 2001 had been about the application, not the molecule: a trial so poorly designed and documented that the agency could not evaluate it — the sloppiness itself a Waksal artifact, the price of a company run on charisma and haste. Reconstructed studies vindicated the science, and Erbitux became exactly what its champion had promised investors it would be: a blockbuster, eventually approved for head-and-neck cancers as well, generating billions in revenue. In 2006 the F.D.A.’s verdict on the original data was rendered fully ironic when Carl Icahn — Waksal’s old friend — seized ImClone’s board; in 2008, Eli Lilly acquired the company for more than six billion dollars, a price that valued ImClone at multiples of its worth on the day its founder went to prison. Waksal, who had been forced to surrender his stake amid his legal ruin, watched the fortune he had correctly imagined accrue almost entirely to others. Among white-collar downfalls his is nearly unique: the underlying asset was real. He went to prison not because the science was a lie but because he could not tolerate two days of being poorer while the truth arrived on schedule.

The prison years themselves became part of the Waksal literature, because he could not stop being interesting even in custody. Visitors and correspondents described a man who organized seminars for fellow-inmates, lectured on science and literature, read voraciously, and treated the minimum-security routine at Schuylkill as a sabbatical to be survived with style — an adaptation so frictionless that profile writers reached, independently and repeatedly, for the same observation: the qualities that made him a superb fund-raiser and a catastrophic fiduciary, the charm, the optimism, the imperviousness to shame, were exactly the qualities that made him good at prison. He completed his sentence, passed through the halfway house on West 137th Street, and re-entered a Manhattan that had, by 2009, fresh scandals to absorb and limited appetite for relitigating his.

He emerged in 2009, disbarred from public-company life but not from ambition, and promptly demonstrated that American finance has no mechanism for keeping a talented salesman away from other people’s money if the salesman reads the rules carefully. The S.E.C. bar prohibited him from serving as an officer or director of a public company; Kadmon Holdings, the pharmaceutical venture he founded within months of leaving the halfway house, was private. He raised enormous sums, hired seasoned scientists, and ran the company in every practical sense until 2014, when — with an initial public offering looming and his history an unresolvable disclosure problem — he stepped back from management. Kadmon went public without him in 2016 and, in 2021, was acquired by Sanofi for $1.9 billion, its lead drug a genuine advance for transplant patients. The arc invites a conclusion almost too neat to trust: twice, companies Sam Waksal built around real science produced real medicines and billion-dollar exits — and twice the medicines succeeded at a comfortable remove from the man himself, as if the system had discovered that his vision was an asset best held in custody, away from his hands.

What the Window Shows

Insider-trading law has always struggled to explain itself to the public in terms grander than tidiness — the money involved is often trivial by scandal standards, the victims diffuse, the harm abstract. The ImClone affair is the standing rebuttal, because it displays with unusual clarity what the rule actually protects. The securities markets asked Sam Waksal to do one thing in the last week of December 2001: nothing. Hold still for forty-eight hours, absorb the same loss as the pension funds and retail believers who had bought his promises at seventy dollars, and let the bad news land on everyone at once. He could not do it. The refusal-to-file letter would cost him on paper; the phone calls cost him everything — and cost the markets another increment of the public’s always-depleting belief that the game is not rigged for the people who run it. Judge Pauley, at sentencing, called the harm “incalculable” for precisely that reason: the direct dollars were small, and the corrosion was not.

And the affair’s long shadow fell on the doctrine itself. The spectacle of Martha Stewart imprisoned for lying about a trade that was never charged, while Waksal — the actual tipper, the forger, the perjurer — became the era’s cautionary emblem, taught the white-collar bar lessons it has never stopped applying: that the cover-up is prosecutable even when the conduct is not; that a compliance department’s refusal to execute an order can be the thin line between disgrace and additional decades; and that in the age of the recorded phone log, the distance between a family phone call and a federal indictment is exactly as wide as the information conveyed. The drug, meanwhile, is still on the market. Patients receiving it have no reason to know the name Waksal, which is, depending on one’s taste in morals, either the system’s failure or its final, quiet success.