According to the Company’s FORM 10-K for the fiscal year ended December 31, 2001, on January 26, 2001, the United States District Court for the Northern District of Illinois dismissed, with prejudice, all of complaints that had been filed in 1999 on behalf of a purported class of purchasers of Abbott stock and consolidated in "In re Abbott Laboratories Securities Litigation". The United States Court of Appeals for the Seventh Circuit affirmed the dismissal on October 17, 2001. A similar complaint, filed by Lena Gallagher purportedly on behalf of a class of purchasers of ALZA stock, was also dismissed. The plaintiffs had alleged federal securities laws violations by Abbott in connection with Abbott's consent decree with the FDA regarding the manufacturing operations of Abbott's Diagnostic Products division in Lake County, Illinois. Plaintiffs have not sought further review and the litigation is now over. On March 28, 2001, the United States District Court for the Northern District of Illinois dismissed a number of shareholder derivative suits filed in 1999 against Abbott's directors in connection with Abbott's consent decree with the FDA. These suits had been consolidated as "In re Abbott Laboratories Derivative Shareholder Litigation".
The original Complaint charges that Abbott and two of its highest officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Complaint alleges that defendants misled investors by concealing important information about an FDA audit of its diagnostic devices manufacturing facility. According to the Complaint, the deficiencies discovered in this audit led the government to file a civil suit against Abbott, which settled when Abbott paid a $100 million fine and discontinued production of many diagnostic products. The Complaint alleges that all defendants were fully aware of the deficiencies enumerated by the FDA audit because they received a detailed letter from the FDA on March 17. The Complaint further alleges that one defendant utilized his inside information regarding the artificial inflation of the Company's stock price to sell significant amounts of his personal Abbott stock holdings. In addition, the complaint alleges that the artificial inflation of the price of Abbott stock permitted the company to pursue two stock acquisitions of other companies under favorable terms.