ICN, Chairman Are Subjects of Grand Jury Investigation
A federal grand jury has launched a criminal investigation into activities by ICN Pharmaceuticals Inc., the highly profitable drug company with a long history of securities run-ins, and its controversial chairman, Milan Panic.
The company confirmed Thursday that a federal grand jury in Los Angeles has issued a subpoena for documents covering a broad range of matters, including information the company previously supplied to the Securities and Exchange Commission.
A source at the Costa Mesa-based company said the grand jury’s focus includes, but is not limited to, alleged insider trading by Panic in late 1994--the subject of a continuing SEC investigation. However, details about the other matters weren’t disclosed.
“They are just asking for records,” the source said, adding: “We have no idea what the focus is.”
Although the company’s stock has been rising in recent days partly on speculation that Panic might be forced out, ICN board member Stephen Moses said Panic is expected to retain his position as chairman, chief executive and president for the foreseeable future.
A source close to the company said neither board members nor any governmental authorities are seeking Panic’s removal. Both Panic and the company intend to cooperate in the grand jury investigation, according to the company’s statement.
Panic and the company have denied allegations of securities violations.
A company source said Thursday that Panic was traveling back to California from his native Yugoslavia, where he served as its prime minister during a seven-month leave from the company four years ago. He is expected to be in California by Saturday.
In the company’s statement, Panic said: “Although we hesitate to comment on outside speculation, we hope this will put to rest recent rumors. In the meantime, we continue to focus on expanding the company, particularly in Eastern Europe.”
Panic could not be reached for additional comment.
The SEC refused to comment and spokeswomen for the U.S. attorney’s office in Los Angeles couldn’t be reached.
Thomas C. Newkirk, associate director in the SEC’s division of enforcement in Washington, although refusing to comment on ICN specifically, explained that the agency investigates civil cases involving alleged insider trading, stock manipulation and similar issues.
However, it turns over serious cases involving willful violations to the Justice Department for potential criminal investigation and possible indictment by a grand jury, he said.
Newkirk noted, for instance, that cases involving gross abuses of the law, repeated securities violations, lying to federal investigators or abuse of a high position tend to be turned over to the U.S. attorney.
Company observers have speculated for months that the government might be pursuing a criminal investigation against Panic and ICN in light of the company’s history of conflicts with the SEC.
In 1977, the SEC sued Panic and ICN, alleging securities violations. In 1991, the agency 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.
In both cases, Panic and the company admitted no wrongdoing.
The SEC launched its investigation last year after Panic sold $1.24 million in company stock in November 1994. The sale occurred after the company learned that the Food and Drug Administration wouldn’t approve its star drug, Virazole, as a stand-alone treatment for the liver ailment hepatitis C.
But the company didn’t disclose the FDA’s decision to investors until February 1995. After the disclosure, ICN stock lost 42% of its value in six days of trading, falling to $13.25.
Federal officials declined to specify how many consent decrees on civil actions brought by the SEC a company can rack up before the Justice Department takes over the case for possible criminal prosecution.
Panic, the board and other company officers are the targets of numerous shareholder lawsuits stemming from the alleged insider trading. An internal ICN board review of the matter last year exonerated Panic from wrongdoing.
In addition, Panic faces accusations of sexual harassment by a former employee who has also charged him in a paternity action. He has denied the charges.
The company’s stock closed at $25.125 a share Thursday, up 12.5 cents for the day.
