Caremark Charged with Breach of Duty

Investors allege that Caremark executives agreed to a low-ball bid in exchange for indemnification against options-backdating charges

Provide news feedback or report an error

Confidential tip?

Send a tip to our reporters

Site feedback:

Take our Survey

By Robert Berner

January 27, 2007 at 9:12 AM UTC

This article is for subscribers only.

Investors in Caremark Rx (CMX) have filed suit against the company's top management and directors charging that they accepted an inadequate takeover bid from CVS (CVS) in large part because the deal protected them from charges of improper backdating of stock options.

The class action, brought by two pension funds in Louisiana and Pennsylvania, was filed in state court in Delaware on Jan. 5. It comes as an investment advisory group told that it had confronted Caremark management with trading data that strongly indicated improper backdating by Caremark directors, in addition to management. CtW Investment Group, which advises union pension funds, contends such backdating would compromise the board's independence, including the board's decision to back management's rejection of a higher-priced offer from Express Scripts (ESRX). "The board's recent decision to endorse an inadequate merger proposal from CVS exacerbates our concern that the board is not acting in the best interests of Caremark shareholders," CtW said in a Dec. 21 letter to Caremark, which was reviewed by .