J&J Faces Shareholder Fraud Lawsuit Over Recalls

Johnson & Johnson was sued for fraud over claims it lied to investors about contamination at manufacturing plants and about the repurchase of defective Motrin tablets from store shelves by J&J-hired consultants.

The complaint by shareholder Ronald Monk claims J&J made misleading statements before disclosing contamination at plants in Puerto Rico and Pennsylvania, and the Motrin recall is now under investigation by Congress. Monk’s complaint also cites the April 30 recall of more than 40 types of children’s medicines.

“As a result of the blatant, systemic, and repeated failure of defendants to maintain proper manufacturing practices at their facilities, defendants have been forced to issue over eight separate recalls including dozens of products and hundreds of millions of individual packages,” the complaint alleges.

The lawsuit, filed Sept. 21 in federal court in Newark, New Jersey, comes amid a U.S. criminal investigation of the recalls and a probe by a congressional panel that has scheduled a hearing on J&J for Sept. 30. The company’s lawyers told the House Committee on Oversight and Government Reform in a letter yesterday that U.S. regulators knew its McNeil Consumer Healthcare unit was recalling Motrin caplets last year.

Carol Goodrich, a spokeswoman for New Brunswick, New Jersey-based J&J, declined to comment on the lawsuit.

J&J shares fell 4 cents, or 0.6 percent, to $61.93 at 2:36 p.m. in New York Stock Exchange composite trading.

Class Action

Monk seeks to proceed as a class-action, or group, lawsuit for investors who bought shares between October 2008 and July 2010. The suit was filed by Barroway Topaz Kessler Meltzer & Check LLP of San Francisco.

The complaint claims J&J withheld material information before its decision in April to shut down a plant in Fort Washington, Pennsylvania, where contamination led to the unpublicized recall of defective Motrin tablets in 2009.

Company lawyers said that its McNeil unit informed the U.S. Food and Drug Administration it was using a contractor to buy defective Motrin from store shelves, according to a letter obtained by Bloomberg News. Lawmakers investigating J&J and FDA in the matter have dubbed the actions a “phantom recall.”

The case is Monk v. Johnson & Johnson, 10-cv-4841, U.S. District Court, District of New Jersey (Newark).

To contact the reporters on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net; Drew Armstrong in Washington at darmstrong17@bloomberg.net.

To contact the editors responsible for this story: David E. Rovella at drovella@bloomberg.net; Reg Gale at Rgake5@bloomberg.net

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