High River LP, a firm controlled by billionaire Carl Icahn, sued Forest Laboratories Inc. seeking details on a U.S. proposal to bar the company and Chief Executive Officer Howard Solomon from doing business with federal health programs.
Shareholders have a right to know what Solomon did or failed to do to warrant such an “unprecedented” action by the government, lawyers for High River said in the complaint filed today in Delaware Chancery Court.
“The company’s public disclosures about this affair have been opaque, inaccurate and seemingly designed to reveal the least possible information,” High River said in the complaint. “The stockholders have not even been informed of the factual charges against Mr. Solomon.”
Forest said in April that it would contest plans by the Health and Human Services Department’s Office of the Inspector General to bar it from U.S. programs. The action follows the company’s guilty plea and $313 million settlement last year for distributing its Levothroid drug before it was approved by the U.S. Food and Drug Administration.
Icahn’s claims are “entirely without merit,” Forest Labs said in an e-mail sent by outside spokesman Hugh Burns.
“The company previously has disclosed the sole basis of the HHS-OIG action against Mr. Solomon, which is that he is ‘associated with’ Forest,” the company said in the statement. “Mr. Solomon has never been accused of any wrongdoing in connection with the matters settled by the company in 2010.”
The company’s plan to challenge any exclusion is a “high risk strategy,” High River said in the complaint.
“If Forest Laboratories is prohibited from participating in federal health-care programs due to Mr. Solomon’s presence at the company, the company’s revenues will be dramatically reduced,” lawyers for Icahn affiliate said.
Forest stands by its decision to support Solomon, the company said in its statement today.
“But whatever the outcome, the company will take appropriate steps to make sure it is not precluded from participation in federal health-care programs,” the company said in the e-mail sent by Burns.
High River and four other Icahn entities, which together own 6.9 percent of Forest, are seeking access to the letter that regulators sent the company in April. The group also wants any documents indicating the company was aware of a possible sanction against Solomon before April 12.
Icahn intends to use the information to support the election of directors, according to the complaint. Earlier this month, Forest said High River would nominate four candidates to the nine-member board.
The case is High River Limited Partnership v. Forest Laboratories Inc. (FRX), CA6614, Delaware Chancery Court (Wilmington)
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