At the end of last week, Teva Pharmaceuticals Industries (TASE: TEVA; NYSE: TEVA) announced that it had reached a settlement with the US Department of Justice and would pay penalties totaling $450 million, payable over six years, without admitting wrongdoing, to end lawsuits brought against it by the US authorities. These alleged price fixing, and illegal payments of kickbacks via charities to patients to cover their co-payments for purchases of Teva’s multiple sclerosis treatment Copaxone by Medicare.
In the wake of the agreed penalty, a derivative lawsuit was filed yesterday in the Tel Aviv District Economic Court against the directors and officers of Teva, alleging that they had approved and concealed the alleged acts that led to the penalty.
Teva shareholder Avraham Barak and Lightcom (Israel) Ltd., which he controls and which also holds Teva shares, allege that Teva’s board was involved in the acts in question, made decisions on advancing them, and also decided how to conceal them.
"This fraudulent activity by Teva was not something trivial carried out by some low-ranking person in the company, but prolonged, significant action that could not have been carried out without knowledge, planning, and involvement on the part of the most senior people at Teva," the statement of claim filed by Adv. Shachar Ben Meir, Adv. Yitzhak Aviram, Adv. Renan Gersht, Adv. Ophir Naor, and Adv. Adi Granot says.
The statement further says that "there is and there can be no doubt that sales of Copaxone are the most important business figure, given the significant and substantial proportion of this drug in Teva’s total revenue."
The statement of claim says that in the past few years a series of criminal affairs have been exposed that have led to harm to Teva’s profits and its reputation, and to the payment of huge sums in penalties.
A year ago, Teva agreed to pay $4.3 billion in compensation to settle claims brought against it in the US arising from its involvement in the sale of opioid painkillers, which caused addiction in about half a million US patients, and even led to deaths.
"Globes" reported that, in the wake of that settlement, Barak and Lightcom, together with other claimants, sued in the Tel Aviv District Economic Court, and, in the settlement of the case, Teva’s insurers agreed to pay it $40 million - the highest amount paid in a derivative action n Israel to date. A derivative action is one in which a shareholder or director files a lawsuit in the name of the company, usually against its management, for damage caused to it, when the company itself refrains from suing.
In the derivative action now filed concerning the Copaxone kickbacks and price fixing affairs, the claimants allege that "this practice of knowingly committing criminal offences cannot be a happenstance part of a company’s activity, and it is clear that all these actions were carried out with the knowledge of the board of directors and under its oversight and in accordance with its decision."
Yesterday’s proceedings opened with a request to obtain documents that would show who among Teva’s directors and officers was apparently involved in the affair, in order to bring a derivative action against them.
A similar application concerning the Copaxone affair was filed several years ago by shareholders who were represented by, among others, Adv. Robert Epstein and Adv. Tomer Bram, and the hearing of that suit is expected to resume following the settlement in the US.
Teva stated in response to the report: "The statement of claim has not yet been submitted to Teva, and when it is received Teva will respond through the appropriate legal channels."
Published by Globes, Israel business news - en.globes.co.il - on October 14, 2024.
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