CALIFORNIA : Proposal to Oust ICN Chairman Is Rejected : Meeting: Firm’s largest shareholder sought to have the controversial executive removed, but the idea failed to win a majority of shareholder votes.

Shareholders of ICN Pharmaceuticals Inc. on Wednesday rejected a proposal from the company’s largest stockholder that sought to oust controversial Chairman and Chief Executive Milan Panic.

But the flamboyant, outspoken businessman still faces a civil lawsuit brought by the Securities and Exchange Commission that alleges he misled investors about the prospects of an experimental drug. The suit seeks to prohibit Panic from running any public company.

About 37% of the votes cast during the Costa Mesa-based company’s annual meeting in New York favored the proposal to remove Panic as chairman. That was far short of the two-thirds majority needed. The revolt was led by the company’s largest shareholder, money manager Heartland Advisors of Milwaukee.

Heartland President William Nasgovitz said Panic’s many legal problems and his arrogant style have hurt ICN’s stock, which has fallen more than 37% since July.

The company, which sells more than 40% of its drugs in Eastern Europe, has been hurt by a currency collapse in Russia, where it sells many of its products. ICN had $439 million in sales last year.

“Shareholders are frustrated,” said David Batchelder, an activist shareholder who was appointed to the company’s board last month after his investment firm bought 1.6 million ICN shares.

ICN shares fell 63 cents to close at $18.75 on the New York Stock Exchange.