Kahn Loses ICN Proxy Vote but Battle Continues : Stocks: Milan Panic demands reimbursement for firm’s legal fees. Shareholders at annual meeting question his policies.
ICN Pharmaceuticals Inc. emerged victorious Tuesday from its bitterly fought proxy battle against Rafi M. Khan and promised to pursue legal action against the dissident shareholder unless it is repaid the $4 million it spent defending itself.
“I consider myself a decent human being and I am not revengeful,” Chairman Milan Panic said during an hourlong press conference after the company’s long-awaited annual meeting, which was held at the drug firm’s Costa Mesa headquarters.
“But he has damaged the company, and we have a duty to collect,” said Panic, who is also a former prime minister of Yugoslavia.
Khan, 43, of La Canada, said he is not responsible for how much money the company spent to fight his proxy challenge and called the demand for reimbursement “a joke.” He vowed to continue hammering away at what he says are a long list of corporate problems that have financially hurt shareholders.
Panic said he favors dropping his company’s lawsuit, which accuses Khan of using insider information to solicit support, if Khan is willing to come forward and negotiate a settlement.
“We are looking forward to closing this chapter in the life of this company and going back to (conducting) business,” Panic said.
For his part, Khan vowed to have his name cleared of any criminal allegations. He said he will pursue evidence to support his allegation that Panic broke the law by running the company while he was the Yugoslav prime minister from July, 1992, to January, 1993.
“There’s going to be some interesting discovery,” Khan said during an impromptu press conference. “It’ll be fascinating.”
As part of his defense, Khan said he sent a letter to David Kessler, commissioner of the U.S. Food and Drug Administration, to dispute claims he had insider information on clinical tests involving the ICN drug Virazole.
And he said he also wrote the U.S. attorney’s office in New York, disputing criminal allegations made by ICN.
Khan launched his bid in April to unseat Panic and the company’s eight other board members, complaining about mismanagement and extravagant executive salaries.
During the 10 months that the two sides battled, Khan raised numerous issues about management that got ICN shareholders to question how the company was run. Nevertheless, a majority of those shareholders backed away from Khan, saying they also had to listen to ICN-inspired questions about Khan’s character as a stockbroker and his experience in running a drug company.
Though Khan spent an estimated $1.5 million in his campaign to oust Panic--a man he once revered as a financial genius--he garnered only about 2 million votes, slightly less than 10% of the total number cast, he said.
By comparison, ICN said it received more than 10 million of the 12.5 million votes cast during Tuesday’s annual meeting.
ICN also announced that it was raising the number of its board members to 10 by appointing Michael Smith, the 1993 Nobel Prize winner in chemistry. Smith becomes the second member of the ICN board to hold a Nobel Prize. Director Roger Guillemin was awarded the prize for medicine in 1977.
Khan’s loss was no surprise--he had already conceded defeat in his run at wresting control of ICN. If he won, Khan said he would have replaced the ICN board with himself and six other handpicked candidates.
But throughout Tuesday’s annual meeting, there remained an undercurrent of shareholder dissatisfaction with ICN management.
Several investors interviewed shortly before the meeting maintained that the company has yet to satisfactorily address many issues that have long bothered them, including executive compensation and the company’s future direction.
Jack Hicks, 58, a lawyer from Lufkin, Tex., said he and his son Trent, 31, voted for Panic, but pledged their support would change if the company does not follow through with promises to enhance profits and increase communication with shareholders.
“Rafi Khan is involved in situations which are not in the best interest for a public company. I just didn’t feel comfortable with him,” Jack Hicks said. “But if things don’t change, next time the challenge won’t be coming from someone who is carrying the baggage Rafi Khan is. You’re going to see a whole different situation.”
Betty Thayer of Anaheim criticized ICN’s all-male board for its lack of diversity. Panic answered that he was talking with several “business ladies” who may be interested in joining the board.
Rod Nikcevic of Los Angeles said that Panic should spend less time on politics and more time running the business he founded in 1960. Though he voted for Panic, he would have voted for Khan if the questions about his credibility were not raised.
“I still am borderline,” Nikcevic said. “But I hope he (Panic) will change.”
And Eddie Bloomfield, another shareholder from Texas, said that management’s style must change. For instance, Panic has long been criticized by many in the investment community for his brash, unapologetic manner. Bloomfield said he was confident the challenge will force some positive changes to emerge.
“I believe Milan will see to it that those things will take place,” Bloomfield said.
But there were shareholders so dissatisfied with Panic and ICN that they supported Khan.
In one of the more dramatic moments of the meeting, shareholder Morris Miller, 79, of Anaheim Hills verbally attacked Panic, saying that the chairman considered himself, and not the other shareholders, the owner of the firm.
“All you say is I , I , I ,” Miller told Panic. “You never say we . The only reason I have not sold my stock is that I am waiting for you to fall down and get bounced out (of the company).”
ICN Proxy Fight Ends
ICN chairman and founder Milan Panic fended off stockholder Rafi Khan’s efforts to unseat him at the company’s annual meeting Tuesday. Highlights of Khan’s acrimonious proxy battle:
1993
* April 2: Khan launches a bid to topple Panic and the eight-member board of directors, claiming they mismanaged the firm and lived extravagantly at stockholders’ expense.
* April 6: ICN sues Khan, accusing him of insider trading, racketeering and violating his fiduciary responsibilities when he acted as ICN’s institutional underwriter. Panic claims Khan is an opportunist who wants to take over the company for his personal gain, not to better stockholders’ interests.
* Nov. 26: U.S. District Judge John Sprizzo blocks Khan’s proxy effort after concluding Khan had been involved in a 1986 securities fraud in Britain and lied to conceal it. Appeals court later reverses the ruling, but the criminal investigation against Khan continues.
* Dec. 8: Sprizzo postpones ICN’s annual meeting from early May to Feb. 1, giving Khan time to put his proxy battle back on track.
1994
* Feb. 1: Panic and the current board receive the vast majority of votes from stockholders at ICN’s annual meeting. Panic vows to seek $4 million in damages from Kahn to cover the expense of fending off the proxy battle.
Source: Times reports; Researched by JANICE L. JONES / Los Angeles Times
