DURHAM — A decision in a Florida court will put money into the pockets of employees of the former Stiefel Laboratories in Oak Hill.
The U.S. District Court for the Southern District of Florida on May 21 overruled the company’s objections to the distribution plan of a $37 million settlement reached last year following a complaint filed by the U.S. Securities and Exchange Commission against Stiefel Laboratories.
The court’s decision will clear the way for payments to employees of Stiefel who participated in a buyback program for stock they owned through the company’s Employee Stock Bonus Plan, according to the SEC.
Payments to former Stiefel employees will be disbursed by Epiq Class Actions & Claims Solutions Inc.
“Epiq will assist the distribution agents in implementing the distribution plan, including by mailing notices and a copy of the distribution plan to eligible and excluded shareholders,” according to the SEC.
Stiefel Laboratories sold the East Durham plant to pharmaceutical giant GlaxoSmithKline in 2009 for $1.5 billion. GlaxoSmithKline was not a defendant in the case.
The $37 million settlement, which was finalized June 5, 2020, stems from an SEC complaint filed in 2011 that the company and its chairman and CEO, Charles Stiefel, defrauded shareholders by buying back their stock at severely undervalued stock prices from November 2006 to April 2009, according to an SEC document.
“The SEC alleges that in each of those years Stiefel Labs and Charles Stiefel used low valuations for stock buybacks and omitted to disclose to the company’s own employees important information that would have alerted them that their stock was worth much more (information that only certain members of the Stiefel family and senior management knew about),” according to the SEC’s 2011 complaint.
The company purchased more than 750 shares of its own stock from shareholders for $13,012 a share, despite the fact that Charles Stiefel was aware that private equity firms had submitted offers to buy preferred stock at prices 50% to 200% higher than employees were paid through the buyback program, according to the SEC complaint.
The complaint also alleged thousands more shares were purchased by the company at prices much lower than what shareholders were paid.
When Glaxo purchased Stiefel in 2009, the stocks were valued at more than $68,000, around 300% higher than employees were paid for their stocks, according to the SEC.
The original complaint against the company was filed by the SEC Dec. 12, 2011, and a settlement of $37 million was determined by the court. On June 5, 2020, the court ordered that a Fair Fund be created so penalties paid by the company could be distributed to the stockholders, according to the SEC.
On May 21, 2021, Judge Darrin Gayles of the U.S. District Court for the Southern District of Florida overruled Stiefel’s objections and approved the distribution plan of the Fair Fund.