ICN Trades Target of SEC, FBI Inquiries : Stocks: Sources say investigators are looking at the sale of 55,000 shares by the firm’s chairman. ICN refused comment.
Two federal agencies are investigating controversial insider sales of $1.24 million in stock of ICN Pharmaceuticals Inc. by its beleaguered chairman, Milan Panic, sources familiar with the inquiries said Thursday.
The Securities and Exchange Commission and the FBI are looking into Panic’s sale of stock last November after he allegedly received negative information that was not disclosed to other shareholders, sources said.
Panic sold 55,000 shares after the Costa Mesa-based company received a letter from the Food and Drug Administration indicating that the company’s star drug, Virazole, would not be approved for treatment of hepatitis C, a highly contagious liver disease. The company did not make the FDA’s decision public until mid-February. After the public revelations, the stock lost 42% of its value in six days of trading, falling to $13.25.
The stock of the major pharmaceutical company closed Thursday at $16.50, down 25 cents.
Sources familiar with the FBI investigation said that early this month, agent Mike Resnick interviewed Eugene Melnitchenko, a former ICN executive, about circumstances surrounding Panic’s stock sale. Sources said Resnick met with Melnitchenko at his Laguna Hills home for about two hours, and quizzed him about when Panic learned about the FDA’s denial letter and how ICN management decisions are made.
Neither of the men would confirm the meeting. Melnitchenko, who left ICN in April, refused to comment. He now works as senior vice president at Principal Financial Securities Inc., a Dallas-based brokerage. An FBI spokesman in the agency’s Santa Ana office, where Resnick works, said the agency would not comment on any investigation. An SEC spokesman refused comment.
David Watt, ICN’s executive vice president and legal counsel, refused to comment on the existence of any inquiries by the SEC or the FBI. “It’s the company’s policy not to comment on these matters, other than what’s in our public disclosure.’
In March, 1994, ICN hired Melnitchenko, a Wall Street health care analyst, as vice president of corporate development and financial relations. Among his duties, Melnitchenko was expected to help repair relations between ICN and investors after the abortive proxy fight for the company’s control by investor Rafi Khan.
Observers suggested that the FBI could be exploring a criminal investigation against Panic and ICN in light of the company’s previous run-ins with the SEC.
In 1977, the SEC sued Panic and ICN, alleging securities violations. In 1991, the agency again made similar allegations against the chairman and the company. Both cases yielded consent decrees in which the defendants agreed to refrain from future violations of securities laws. Panic and the company admitted no wrongdoing.
