GSK’s Stiefel accused of shares fraud
pharmafile | December 13, 2011 | News story | Sales and Marketing | GSK, SEC, Stiefel, fraud
The US financial regulator has charged a subsidiary of GlaxoSmithKline with defrauding staff by buying back shares from them at less than they were worth.
The Securities and Exchange Commission (SEC) says dermatology products manufacturer Stiefel Laboratories, bought by GSK two years ago, used low valuations for stock buybacks from 2006 to 2009.
Stiefel’s former chairman and chief executive Charles Stiefel has been charged with the same offence after the company “omitted key information that would have alerted employees that their stock was actually worth much more”, according to the SEC.
This information included the potential acquisition by GSK as well as the knowledge that various private equity firms had submitted offers for – or bought – preferred stock based on valuations of Stiefel that were between 50% and 300% higher than those used for buybacks.
The SEC says that between December 2008 and April 2009, Stiefel purchased more than 800 shares of its stock from shareholders at $16,469 a share – yet announced soon after that GSK was buying the company for $68,000 per share.
“Stiefel Labs and Charles Stiefel profited at the expense of their employee shareholders who lost more than $110 million by selling their stock based on the misleading valuations they were provided,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office.
At the time of the alleged offences, Stiefel was a private company. The SEC’s case suggests that only Charles Stiefel, some members of his family and some senior managers knew of the issues which affected the share price.
“Private companies and their officers must understand that they are not immune from the federal securities laws, which protect all shareholders regardless of whether they bought stock in the open market or earned shares through a company’s stock plan,” Bustillo concluded.
Adam Hill
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