The original complaint alleges that defendants violated the federal securities laws by issuing materially false and misleading statements throughout the Class Period that had the effect of artificially inflating the market price of the Company's securities. Specifically, the complaint alleges that during the class period, defendants failed to disclose critical information about the Company, including that: (i) during the third and fourth quarters of 2001, and the first quarter of 2002, the Company engaged in "channel stuffing" to distributors as evidenced by the fact of a very large supply of product had been sent to distributors in an effort to artificially boast its reported earnings; (ii) during the third and fourth quarters of 2001, and the first quarter of 2002, the Company violated GAAP by improperly recognizing revenue from sales to distributors, when, in fact, those revenues were not properly recognizable; and (iii) revenues were overstated in the third and fourth quarters of 2001, and the first quarter of 2002. It is further alleged that on or about June 14, 2002, just days after defendants gave high but false earnings and revenue guidance, Panic exercised options for and then sold at inflated prices, more than 900,000 shares of ICN stock, earning millions of dollars in profits. In response to these disclosures revealing, at least in part, the Company's true financial condition, ICN's shares fell sharply. ICN's stock, which had opened on July 10, 2002 at $19.95, dropped $10.65 to close at $9.30, a decline of 53%.
Note: ICN Pharmaceuticals, Inc. changed its name to Valeant Pharmaceuticals International using new symbol VRX.
Since July 25, 2002, multiple class actions have been filed in the United States District Courts for the Eastern District of New York, the District of New Jersey and the Central District of California against the Company and some of its current and former executive officers. The lawsuits allege that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing false and misleading financial results to the market during different class periods ranging from May 3, 2001 to July 10, 2002, thereby artificially inflating the price of the Company’s stock. The lawsuits generally claim that the Company issued false and misleading statements regarding the Company’s earnings prospects and sales figures, its operations in Russia and the earnings and sales of its Photonics division. The plaintiffs generally seek to recover compensatory damages, including interest. The actions filed in the Eastern District of New York and the District of New Jersey have been transferred to the Central District of California by stipulation of the parties. The parties to all of the class actions pending in the Central District of California have filed an Initial Case Management Order seeking to have all related actions consolidated before the Honorable David O. Carter. The Company filed a motion to dismiss plaintiffs’ consolidated amended complaint on August 29, 2003, which the Court granted in January 2004. The plaintiffs filed a second amended consolidated complaint in February 2004. The Company filed a motion to dismiss plaintiffs’ second amended consolidated complaint on March 8, 2004.
On August 16, 2004 Judge David O. Carter ordered that the action against defendants ICN Pharmaceuticals Inc. and certain Individual Defendants were dismissed with prejudice. A Notice of Appeal was later filed by the plaintiffs and the case is pending in the Ninth Circuit Court of Appeals. On September 27, 2004, U.S. District Judge David O. Carter issued a Final Judgment in favor of defendant Pricewaterhousecoopers LLP, dismissing the consolidated class action complaint with prejudice.
On January 7, 2005, the Ninth Circuit Court of Appeals granted the Appellant’s motion to consolidate the appeals. On July 28, 2006, the Court entered the Judgment from the Ninth Circuit Court of Appeals. The Ninth Circuit affirmed the dismissals of the claims.