Nasty Battle Rages Over Costa Mesa Drug Firm : Medicine: ICN stockholders to choose which of two wealthy immigrants will guide the company.
Rafi M. Khan and Milan Panic have much in common: Both are immigrants who found wealth in the United States and both are colorful executives who stand out in the often bland, button-down milieu of business. And each man’s business dealings are wreathed in controversy.
Once allies in the promotion of Costa Mesa-based ICN Pharmaceuticals Inc., Khan and Panic (pronounced PAHN-ish) now find themselves in a spectacularly nasty squabble, each lining up allies and deploying squads of lawyers in a battle for control of the company.
The fight heated up last week after a federal court on Oct. 19 allowed Khan to go ahead with his long-threatened proxy solicitation designed to oust Panic from the chairmanship of ICN, and throw out the company’s other directors as well.
Panic, who had a tormented and brief stint last year as prime minister of his native Yugoslavia, founded and presides over a company that makes drugs for treating everything from cancer to arthritis.
Khan, a high-profile, former Beverly Hills stockbroker, once promoted ICN when other brokers and analysts were shying away from it.
Khan now claims that Panic is an overpaid autocrat who manages the company poorly at the expense of shareholders. In documents filed with the SEC, Khan maintains that Panic has received extravagant compensation--more than $6 million in 1991--and made corporate decisions that have caused ICN to lose about $150 million over the past five years and $65 million last year alone.
Meanwhile, ICN suggests that Khan is an opportunist who is using insider information as he tries to take control of the company.
Regardless of who wins when shareholders vote Dec. 15, both will emerge flecked with mud.
Neither Khan nor Panic would comment for this article.
“In the mutual fund business, you will run into a lot of very strange situations,” said Bob Lange of Linder Management Corp. in St. Louis. “But I don’t recall anything else quite like this before.”
Khan is a dapper, balding man of 43 whom some clients regard as a wizard at picking small, undervalued stocks poised for big profits.
But he generates lawsuits like Johnny Appleseed generated apple trees. In addition to several suits filed by ICN in the months of legal wrangling over whether the proxy solicitation should proceed, Khan is the subject of lawsuits in relation to other stocks he represented, including Future Communications Inc., a Dallas-based cable TV programmer, and Spectrum Information Technologies Corp., a New York telecommunications firm.
Khan was recently hired as a broker with Phoenix-based Desert Mountain Securities--his third job this year. He was hired there after quitting his positions as director and broker three weeks ago at RKS Financial Group Inc. and its brokerage unit, Reynolds Kendrick & Stratton in Beverly Hills.
Before that, Khan worked as a broker for H.J. Meyers & Sons of Beverly Hills, where he sold ICN stock as an underwriter in 1992. A federal judge ruled in May that Khan was using insider information to solicit shareholder support while at H.J. Meyers and lied under oath.
Some observers said they believe Khan’s earlier troubles with securities regulators are likely to hurt his chances for success in the proxy fight, which comes at a time when investors in medical companies are wary of needless change and would probably support the current board.
The judge’s declaration that Khan “committed willful perjury” is one of the nicer things that has been said about the Pakistani immigrant since he first appealed to shareholders last spring to oust the ICN management.
ICN took out a full-page, $114,000, ad in the Wall Street Journal last week headlined “Don’t Be Conned by Khan.” “Do You Want a Speculative Trader to Run Your Company?” it asked shareholders.
That hard-nosed response is typical of the 63-year-old Panic. He is a tough boss who has been known to yell at employees.
Panic founded ICN in 1960 with $200 and a washing machine. Now the $5 million worth of ICN stock he holds makes him a wealthy man; he has cultivated a taste for expensive, conservative suits and wears his graying hair swept straight back from a high forehead.
Criticism of Khan notwithstanding, ICN’s own history isn’t exactly unblemished.
When the Food and Drug Administration took issue with its claim that its ribavirin drug was an effective treatment for AIDS, Panic called the head of the FDA “the jerk commissioner.”
Then there was the lawsuit by the Securities and Exchange Commission in 1991 that said ICN misled investors about ribavirin. The company settled that suit without admitting wrongdoing. A criminal probe was dropped after ICN paid a $600,000 settlement.
Investors and analysts generally agree that change is needed at Panic’s four-company drug empire: ICN, SPI Pharmaceuticals Inc., ICN Biomedicals Inc. and Viratek Inc. But some say they do not believe Khan is the cure. ICN, whose stock was trading at about $23 a share early last year, closed Friday at $11.125.
Profile: Milan Panic
Age: 63
Position: Founder and chairman, ICN Pharmaceuticals, Costa Mesa
Background: Born in Belgrade, Yugoslavia, and immigrated to the United States in 1956. Founded ICN in 1960 and built it into a $1-billion empire. Took a leave of absence in July, 1992, to serve as prime minister of Yugoslavia, but returned in March, 1993, after losing an election to Serbian President Slobodan Milosevic.
Compensation: In 1991, he received $6.1 million: Orange County’s highest-compensated exec that year.
Source: Times reports, Bloomberg Business News
Profile: Rafi M. Khan
Age: 43
Position: Stockbroker at Desert Mountain Securities, Phoenix.
Background: Former broker at Beverly Hills firm Reynolds Kendrick Stratton. Waging a proxy battle to remove Milan Panic as chairman of ICN Pharmaceuticals Inc., and replace its current board of directors.
Lawsuit: In April, ICN filed suit against Kahn, accusing him of insider trading, racketeering and violating his fiduciary responsibilities when he was an institutional underwriter for the company.
Source: Times reports
Los Angeles Times
