ICN Pleads Guilty to End Fraud Case
After battling a federal criminal probe for six years, ICN Pharmaceuticals Inc. said Tuesday that it agreed to plead guilty to securities fraud for misleading investors about its biggest selling drug, ribavirin.
The Costa Mesa drug maker agreed to a $5.6-million fine and a three-year probation to settle federal criminal charges that it withheld information for months after learning that federal regulators had refused to allow the use of the drug by itself as a treatment for hepatitis C, a deadly liver disease. ICN is scheduled to enter its guilty plea Monday in federal court in Los Angeles.
ICN has been the target of regulatory investigations and shareholder lawsuits several times over its delayed disclosure of the ribavirin ruling, but this is the first time the company has admitted wrongdoing, said David Seide, assistant U.S. attorney in Los Angeles.
As part of its probation, ICN agreed to a compliance program, including hiring an outside consultant to review news releases for accuracy, Seide said.
Although its guilty plea will end the lengthy criminal probe, ICN and its beleaguered chairman, Milan Panic, face other legal battles over the issue.
A civil suit by the Securities and Exchange Commission seeks, among other things, to have Panic barred from serving as an executive in any public company. The SEC alleges that Panic and others sold ICN’s stock before disclosing the Food and Drug Administration’s ruling.
After ICN informed investors on Feb. 17, 1995, the stock was pummeled, falling 23%. The shares closed Tuesday at $31.37, up 43 cents, on the New York Stock Exchange.
The company disclosed in April that a federal grand jury had decided against indicting Panic and other executives but still was considering an indictment against the company. At the time, ICN said it was discussing a plea bargain and that it had set aside $9.25 million to cover potential liability and costs in the criminal case and pending civil lawsuits.
ICN also hopes to reach a settlement with the SEC, spokesman Alan Charles said. But the company acknowledged previously in a regulatory document that it had reached an impasse with the agency and expects to go to trial in May 2003.
Since the 1994 FDA ruling, ribavirin has become ICN’s star drug, being used in combination with a Schering-Plough Corp. drug to treat hepatitis C. Ribavirin accounted for about 13% of ICN’s revenue in its most recent quarter.
Tom DesChamps, an analyst with Mehta Partners in New York, said ICN’s settlement, though “raising questions about [management’s] past judgment,” is a positive development, allowing the company to resolve a criminal probe that was creating uncertainty.
