Abortion Pill Maker Denies Suit Charges
A San Diego company with a license to manufacture and distribute the controversial abortion pill RU-486 in the United States surfaced Tuesday to deny allegations in two lawsuits that it attempted to hide the fact that its chief partner is a convicted criminal and disbarred lawyer.
Neogen Investors, an investment partnership controlled by Joseph D. Pike of San Diego, also said it will fight any attempts by its business partners to force it to give up rights to the potentially lucrative license.
Neogen was responding to a civil lawsuit filed Friday by Giant Group of Beverly Hills, which accused Pike of concealing his past legal and professional problems while Giant was negotiating to invest $6 million in the concern that would make and distribute the drug.
The suit disclosed for the first time the identity of a firm holding a U.S. license for the abortion pill.
On Monday, the Population Council, a New York-based family-planning research group that holds the U.S. patent rights to the French pill, also called mifepristone, sued Pike on similar grounds. The council has sublicensed those rights to several firms, including Pike’s.
The council alleged that Pike fraudulently concealed “crucial facts bearing directly on his character,” specifically that he was convicted of forgery in May in North Carolina and is on probation after receiving a two-year suspended sentence.
But a Neogen spokeswoman denied key allegations in Giant Group’s suit, including that Neogen ever agreed to terms under which Giant would invest in Pike’s concern. In fact, Neogen said it decided against accepting Giant’s money.
“We have no contractual agreement with Giant,” said Leslie Sebastian, a Neogen vice president.
Sebastian said Giant did submit a proposal to invest in the project but that Giant never submitted a “presentable offer” and “we never took any money from them in any form.”
Moreover, Sebastian said Neogen had concerns about whether Giant was “a suitable partner” after “questions were brought to light” about Burt Sugarman, a financier and former Hollywood producer who is chairman and chief executive of Giant Group.
Since the mid-1980s, Sugarman and companies he has headed have been involved in several bitter corporate takeover attempts.
In 1991, Sugarman paid nearly $620,000 in fines to settle Securities and Exchange Commission charges that he failed to follow federal reporting requirements while he amassed a large stake in the Rally’s hamburger chain.
The same year, a Los Angeles Superior Court jury found Sugarman guilty of civil fraud in a suit brought by Los Angeles investment banker Michael Tennenbaum, who had advised Sugarman on several investment deals.
“We did a Nexis search [on Sugarman] . . . got the headlines and went, ugh, yellow flag,” Sebastian said. “We wondered if he would be suitable to bring on in this capacity.”
Aides to Sugarman have referred calls to Terry Christensen, an attorney for Giant Group, who has not returned several phone calls seeking comment.
As for Pike, Sebastian said his “role in the company probably will be changed” because of the concerns of the Population Council, which has said Pike “is not an appropriate person” to be involved in the RU-486 program. She declined to specify what his new role might be.
“We were aware of the incidents with Mr. Pike and he has expressed sorrow and apologized for any harm or hurt it caused anyone,” Sebastian said. His problems “arose from incidents in 1985, and he has spent the last 11 years atoning for that. If not for him, this project would not have gotten off the ground.”
The Population Council said it became aware of Pike’s past problems in July and began negotiations to get him to withdraw from the venture. When no agreement could be reached, the council filed its lawsuit, said Sandra Waldman, a council spokeswoman.
But Sebastian claimed the council was aware of Pike’s past problems on July 31, when it accepted a $2-million licensing payment from Neogen. And she contended that Giant also knew of Pike’s problems before Sept. 24, when it proposed investment in Neogen.
Sebastian said Neogen will name a major new investor for the project later this month and “is continuing to move forward” toward introduction of the abortion pill. RU-486, which was expected to go on the market in late 1997, has received preliminary marketing approval from the Food and Drug Administration.
