According to the Company’s FORM 10-Q For The Quarterly Period Ended September 30, 2002, in September 2002, four securities fraud class actions filed against Andrx and certain of its current and former officers and directors in the U.S. District Court for the Southern District of Florida for alleged violations of certain of the provisions of the securities laws, were voluntarily dismissed. These actions were filed after Andrx's August 2002 disclosure that, for 1999-2002, an employee had made numerous improper entries in its accounts receivables records that affected customers' balances and their agings.
The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between February 10, 2000 and August 12, 2002, thereby artificially inflating the price of Andrx securities. The complaint alleges that the Company: (1) engaged in improper accounting practices which had the effect of materially overstating its reported earnings and understating its losses; (2) issued materially false and misleading financial statements not prepared in accordance with GAAP; and (3) lacked proper accounting controls and revenue recognition practices at its subsidiaries and which permitted its employees to commit accounting improprieties for a period of over three years.
On August 12, 2002, the Company announced that, as a result of its internal audit process, management has learned that an employee at one of its subsidiaries appears to have altered certain accounting records pertaining to accounts receivable balances and aging relating to its pharmaceutical and distribution operations, thereby potentially affecting Andrx's allowance for doubtful accounts. Based upon its investigation, it appears that the Company's previously announced net accounts receivable of $103.6 million as of June 30, 2002, may have been overstated by as much as $15 million relating to the period from January 1, 1999 to date. As a result of these accounting improprieties, Andrx would be required to restate earnings for prior years and/or account for these misstatements as a charge in the current period. In the aftermarket trading on the date of the announcement of the accounting irregularities, Andrx's stock declined by 16% or $3.57 per share, from $23.32 to $19.75.