ICN Discloses Loan to Its Chairman

ICN Pharmaceuticals Inc. lent company Chairman Milan Panic $3.5 million in cash to meet some personal obligations, then agreed to guarantee a bank loan that he obtained to reimburse the Costa Mesa drug maker, according to securities reports and a company spokesman.

David Watt, the drug company’s legal counsel, said the company made the loan because “we felt it was necessary to enable the chairman to devote his full attention to the business.”

According to the company’s financial statement, Panic’s stock options provided collateral for the company’s guarantee of the bank loan. It provided no further details on Panic’s intended use of the funds.

Panic controlled 4.4% of the company’s stock as of March 31, according to the company’s recent proxy. At the time, his stake included 255,948 common shares and exercisable options to buy an additional 1.2 million shares.

The stake was worth $29.4 million, based on the stock’s closing value Monday of $20.50 on the New York Stock Exchange.

It’s clear, however, that Panic recently has faced sizable legal obligations.

According to a court filing, the IRS is seeking $951,000 in unpaid back taxes and related penalties from Panic and his wife, Sally, for six years, stretching back as far as 1982. The couple challenged the IRS claims in federal court.

In mid-June, the company disclosed that Panic intended to exercise options worth $3.4 million and sell nearly 129,000 shares to pay taxes and related expenses. Although analysts at the time speculated that Panic might use the money to settle the IRS debt, Watt said he believed the money would be used to satisfy Panic’s current taxes.

As for other potential liabilities, the company and Panic recently settled a lawsuit brought by a former employee who charged Panic had sexually harassed her. The company and Panic admitted no wrongdoing.

The settlement was confidential, and it’s unknown whether either Panic or the company paid money.