Thursday, January 29, 2009

Blago the Clown Just Doesn't Get It

Governor Rod Blagojevich just doesn't get it. I think he really believes that he is above the law and ethics. However, he was thrown out of office Thursday without a single lawmaker rising in his defense, ending a nearly two-month crisis that erupted with his arrest on charges he tried to sell Barack Obama's vacant Senate seat.
Blago the Clown is the first U.S. governor in more than 20 years to be removed by impeachment.
After a four-day trial, the Illinois Senate voted 59-0 to convict him of abuse of power, automatically ousting the second-term Democrat. In a second, identical vote, lawmakers further barred Blagojevich from ever holding public office in the state again. The man is the outer limit of ridiculous and has no idea what a public servant does for a living. He had the gross lack of insight to state that he was framed, set up, and that he did nothing wrong. Wow.

Tuesday, January 27, 2009

Former General Counsel of Peregrine Systems Pleads Guilty to Fraud

Ethisphere Magazine reports that the former General Counsel of Peregrine Systems faces as many as 30 years in prison and up to a $1 million fine after pleading guilty to one count of bank fraud in January. The fraud dates back to 2002 when the company disclosed accounting irregularities that reportedly totaled $500 million in overstated revenue and $3 billion in understated net loss. Richard T. Nelson, the former GC, faces sentencing in April. He will be one of over a dozen former executives and outside consultants that have already pleaded guilty in this case. This group includes former CEO Stephen Gardner who was sentenced to just over eight years in prison. It is samazing that an educated man like Mr. Nelson could rise to the level of being the General Counsel of this large entity and then rationalize, along with a reported 18 others, overstating revenues and understating net loss. The duty to shareholders by executives needs to be reinforced, or perhaps tatooed, on some of these executives heads.

Friday, January 16, 2009

We Have a Winner! Biggest Settlement in US by Eli Lilly for $1.415 Billion

Yes, with a "B." I promise I do read things besides pharma news (last three blog entries about pharma or related). It's just the pharma industry is out of control this month! $1.415 Billion...that's some serious dinero, folks. Eli Lilly and Co. agreed Jan. 15 to plead guilty and pay $1.415 billion to resolve allegations related to the promotion of its antipsychotic drug Zyprexa for off-label uses.
The resolution includes a criminal fine of $515 million, which the DOJ said was "the largest ever in a health care case, and the largest criminal fine for an individual corporation ever imposed in a United States criminal prosecution of any kind." The company also agreed to forfeit an additional $100 million in assets. The company signed a plea agreement admitting its guilt to a misdemeanor criminal charge of misbranding. In a criminal information filed against Lilly in connection with the agreement, the company was charged with promoting the medication as a treatment for dementia, including Alzheimer's dementia, among other off-label uses.
The company also agreed to pay up to $800 million in a civil settlement with the federal government and the states. The settlement resolves allegations that by marketing Zyprexa for unapproved uses, the company caused false claims for payment to be submitted to Medicaid and other federal health care programs. The civil allegations originally were brought in four qui tam lawsuits brought under the federal False Claims Act. The federal share of the civil settlement will be $438 million, with $361 million going to states that choose to participate in the agreement. The qui tam relators (employees of Lilly most probably) will receive more than $78.8 million from the federal share of the civil settlement amount. The Lilly press release says there has been "a resolution" and they are concerned about the "misdemeanor charge." Denial is a powerful thing, ya'll. You have to admit you have a problem with your corporate culture before you can change it.

Thursday, January 15, 2009

Like watching a barn burn...

KV Pharmaceuticals may have lost its ethical direction, presumably from the management down, in a spiral of events that continued today with a class action lawsuit against the company by its shareholders. Look at how the company has one problem after another. I only noticed this because I work in the pharma industry so the name caught my eye...repeatedly.

April 20, 2007: Victor Hermelin, the 93-year-old founder of KV Pharmaceutical Co. and loving father, has gone to court to try to have his son Marc Hermelin, president of KV, removed as a trustee of one of four trusts set up to benefit Victor Hermelin's five children and his ex-wife.
In his lawsuit filed March 1st in St. Louis County Probate Court, the elder Hermelin charges that Marc Hermelin, 64, has managed a $35 million trust to favor himself and selected relatives and has a conflict of interest in his dual roles as company president and trustee. Marc does okay despite his not-so-supportive dad, until he's fired down the page a bit.

July 29, 2008: Maybe Marc's dad thought his son lacked a moral compass... Agents from the FDA and the US Marshal’s Service grabbed $24.2 million worth of unapproved drugs from KV. The majority of the products seized were made after the FDA required an end to their production, according to US Attorney Catherine Hanaway (see statement). The seizure followed an FDA inspection of several of KV’s plants earlier this year, when investigators found the drugmaker was not complying with an FDA enforcement notice warning that drugs in time-release format containing guaifenesin, an expectorant, must be approved by the FDA to ensure the safe and effective release of the active ingredients.

December 11, 2008: KV Pharma Fires CEO. KV terminated the employment of Chief Executive Marc Hermelin with cause, but would not specify a reason. Hermelin, however, claims that he effectively retired from his employment with the company prior to the board’s action. Hermelin led the company for over three decades. (Editorial note: It was an odd management choice to state publicly that he was terminated "for cause." There's no benefit to the company and exposes them to potential fraud allegations if cause can't be successfully established.)

December 24, 2008: DOH! KV Pharma shares dive after painkiller recall. Shares of KV Pharmaceutical Co. dropped to all-time lows after the company issued its second product recall in two months, and said it is suspending all sales of tablet drugs because of the risk some tablets were oversized. The tablets were made by KV's Ethex subsidiary, and sold in bottles of 100. An overdose of the drug can cause breathing problems, low blood pressure and unconsciousness.

January 14, 2009: The law firm of Milberg LLP is investigating conduct of KV's officers and directors. The lawsuits charge KV and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Some of the investigations have to do with the recall mentioned above, presumably that the officers and directors knew the drugs were not within specification of the FDA-approved label, but chose to do nothing (to avoid an expensive recall). It might have gone like this: "Let's take a vote, Board...potential death to patients due to accidental overdose from KV's too strong pills ...or an expensive recall?" Wow.

Tuesday, January 6, 2009

FDA Warns Weight-Loss Products' Manufacturers

The FDA's enforcement action against 28 manufacturer's of over-the-counter weight loss products revealed that many of the products contain drugs not approved for use in the United States, some of which may have dangerous side effects. The manufacturer's responses to the FDA's concerns have reportedly been slow and some of the infractions against FDA regulations severe. As such, the FDA is considering seizing some of these products and shutting down the websites which market these products. However, one manufacturer, found at, posted an FDA notice on their website, regarding the "undeclared" active ingredient in their weight loss product. Perhaps not enough to provide customers full disclosure of the dangers of the active ingredients, but at least they acknowledge there is an issue. The FDA's investigation was a major victory for GlaxoSmithKline, the marketer of "Alli," the only FDA-approved weight loss product on the market.