Ruling of Appeals Court a Blow to ICN President : Dissident: The action leaves foe free to push for ouster of Milan Panic, the firm’s colorful founder.

A federal appeals court dealt a blow to ICN Pharmaceuticals Inc. on Wednesday, overturning a lower court ruling that had barred a dissident shareholder from trying to overthrow the company’s colorful chairman.

Beverly Hills stockbroker Rafi Khan, who once sold ICN shares but has since become one of the company’s chief detractors, is now free to press on with his proxy battle to oust ICN’s directors, including Chairman Milan Panic, who founded the company in 1960.

Panic, who returned to ICN in February after serving for nine months as premier of Yugoslavia, is known in financial circles as a flamboyant businessman. According to company lore, he came to the United States from Yugoslavia in 1956 and reportedly started ICN with $200. Since then he has earned praise for his financial acumen and criticism for his blunt manner.

Khan accuses Panic of living a lavish lifestyle at ICN’s expense. The chairman accepted executive compensation of about $6 million two years ago and continued to draw his annual salary of $500,000 while in Yugoslavia.

The company has staunchly denied Khan’s accusations, maintaining that Panic deserved what he was paid for guiding the company to financial success.

Khan, nevertheless, remains determined to push Panic out.

“I have every intention of proceeding,” said Khan, who owns 120,000 shares of ICN stock. “This is a landmark decision.”

The ruling by the U.S. Court of Appeals for the 2nd Circuit in New York, announced late Wednesday, also opens the door for ICN’s long-awaited annual meeting. ICN attorneys succeeded in postponing the meeting, which had been scheduled for May.

They argued that holding it then would not be appropriate because the appeals court was still considering whether to set aside the May 13 ruling barring Khan from proceeding with his proxy fight.

Putting off the meeting also kept critics of Panic from staging a public coup.

ICN spokesman Paul Knopick said that the company could not comment on Wednesday’s ruling because it had not yet seen the court’s opinion. A statement may be released today, he said.

Khan, a stockbroker for Reynolds Kendrick & Stratton, said that, though he has not yet seen the ruling, he feels vindicated.

A strong booster of ICN when he worked at Beverly Hills brokerage H.J. Meyers & Co., Khan began his battle against the pharmaceuticals company in April.

Khan’s efforts landed him in court when the company filed a suit against him, alleging that he violated securities laws and breached his fiduciary responsibility as a broker when he set out to topple Panic.

In issuing the lower court ruling on May 13, U.S. District Judge John Sprizzo had said that Khan was guilty of lying to court and had used inside information in his fight against Panic.

Jack Sholl, senior vice president at ICN, said late Wednesday that, though he had not yet seen the latest ruling, “it is our understanding that the company’s suit . . . against Khan was not affected.”

If Khan persists with his proxy fight, Sholl said, ICN will continue with its legal action against him.

In Wednesday’s trading on the New York Stock Exchange, ICN fell slightly to close at $9.75 a share, down 37.5 cents.