Probe too little, too late

Many question lack of focus on Erbitux, insider trading

By Randi F. Marshall | Newsday Staff Writer

12:06 PM EDT, October 15, 2002

After more than 10 hours, hundreds of pages of evidence and a dozen witnesses, the much-hyped hearings on Manhattan biotech ImClone Systems Inc. came to an abrupt end last week, leaving investors and experts asking: Now what?

The answer, apparently, is "Not much."

To be sure, committee spokesman Ken Johnson says there will be a committee debriefing, followed by a report to the Justice Department and the Securities and Exchange Commission.

But little new emerged from the congressional investigation, some observers said. They argue that the public hearings were more about politics and posturing than the search for what happened to ImClone's cancer drug, Erbitux, and potential charges of insider trading.

"In a number of cases, obviously, Congress feels sort of compelled to hold hearings," said attorney William E. Lawler with Vinson & Elkins in Washington, D.C.

"Unfortunately, a lot of those turn into occasions for a lot of people to get sound bites in ... and the investigative impact in a case like this is less."

Most experts said they don't expect significant legislative changes, policy moves or legal fallout from the 10-month-long congressional investigation and two full days of questioning.

ImClone watchers added that Congress could have done more to delve into the development and approval of Erbitux, designed to target and shrink malignant tumors, particularly in colorectal cancer.

Many shareholders argued that the drug -- and not the corporate scandals affecting the company -- should have been the hearing's focus.

"I walked away with disappointment," said Lloyd Paul, an ImClone shareholder and cancer survivor who came from Michigan to attend the hearings.

"The premise of all of this was the cancer patient, and I don't think anything - especially out of the second meeting - came out that would benefit any cancer patients whatsoever."

Sometimes, though, the benefits of such hearings are intangible. The public forum and outcry might push prosecutors to pursue such cases more diligently, according to Norm Ornstein, a resident scholar with the American Enterprise Institute, a Washington, D.C., think tank. And many ImClone supporters see the hearing's conclusion as supportive of Erbitux.

Committee spokesman Johnson said the "exhaustive" investigation and hearings were important to exposing what he called a "sad commentary on corporate America."

"We uncovered an awful lot of damning evidence with respect to how some corporate officials and boards will do anything to turn a profit," committee spokesman Johnson said. "It's important to understand the problem before you try to resolve it."

But some congressional experts noted that it may be too late - especially for ImClone investors, who have seen the company's shares plunge from more than $75 last autumn to just $7.36 yesterday

"I think the hearings are locking the barn door after the horse is out," said Susan Tolchin, a public policy professor at George Mason University. "They shouldn't have allowed this kind of thing to happen ... They should have seen these issues coming."

Tolchin said that while the Sarbannes-Oxley accounting reform law passed over the summer may have been, in part, a product of previous corporate governance hearings, the ImClone sessions will likely not produce "better legislation" or other significant results.

A congressional committee's final report sometimes includes editorial comment, or fault-finding, but the one on ImClone is unlikely to do so during an ongoing criminal investigation, sources said.