On May 2, 2011, a derivative complaint was filed against eleven members of the Board of Directors of Johnson & Johnson alleging breach of fiduciary duty, mismanagement and violations of the federal securities laws based on the company’s recent settlements with the Department of Justice and the Securities Exchange Commission regarding violations of the Foreign Corrupt Practices Act. As Kevin LaCroix’s blog, The D & O Diary, pointed out, this was the "the first civil lawsuit relating to" the Government’s investigations into "whether drug companies paid bribes overseas to increase sales and to obtain regulatory approvals."
On April 8, 2011, DOJ announced that Johnson & Johnson had agreed to pay a $21.4 million criminal penalty as part of a deferred prosecution agreement to resolve improper payments by its subsidiaries to government officials in Greece, Poland and Romania and kickbacks paid to the former government of Iraq under the United Nations Oil for Food Program in violation of the FCPA. The same day, the SEC announced that it had charged Johnson & Johnson with violating the FCPA based on same conduct. The company settled with the SEC by consenting to a court order permanently enjoining it from future violations of certain provisions of the Exchange Act and agreeing to pay over $38 million in disgorgement and $10 million in prejudgment interest.
In the shareholders’ derivative lawsuit, Wollman v. Coleman, No. 11-cv-02511 (D.N.J. Filed May 2, 2011), plaintiffs alleged that the Board members failed to implement internal controls to detect …
Continue Reading →
On March 10, 2011, Cornerstone Research announced the results of its latest study: "Securities Class Action Settlements – 2010 Review and Analysis." The Annual Report, which provides detail on settlement summary statistics and an analysis of case characteristics, reviewed the 86 court-approved settlements in 2010, finding that the number of settlements fell to its lowest in ten years and that the total dollar value of settlements fell 17%. However, the median settlement amount increased over 40% in 2010.
One of the co-authors of the report, Professor Laura Simmons of the College of William & Mary, stated in the Press Release: "I don’t expect the sharp drop in the number of settlements to reoccur in the near future; however, the broad-based shift toward higher settlement amounts may persist in upcoming years."
Additional findings announced by Cornerstone include:
• settled cases where there was a corresponding SEC action prior to the class action settlement increased to 30% in 2010 (compared to 20% in 2009), and those cases tend to result in higher settlement amounts;
• the number of class actions involving companion derivative actions fell slightly in 2010 when compared to 2009, but still remain higher than the average number of cases since the passage of the Private Securities Litigation Reform Act; and
• approximately 70% of the settlements announced in 2010 were related to violations of generally accepted accounting principals (a 5% increase over 2009) and those cases "continued to be resolved with statistically significant larger settlement amounts" than cases …
Continue Reading →