A New York federal judge on Wednesday postponed the annual meeting of ICN Pharmaceuticals Inc. until Feb. 1, allowing dissident stockholder Rafi M. Khan more time to revive his twice-foiled drive to oust the Costa Mesa drug company's board of directors.
U.S. District Judge John Sprizzo also said that he has referred the Khan case to the U.S. Attorney's office in New York so officials can investigate the 43-year-old stockbroker's conduct and determine whether he violated laws during ongoing hearings on the ICN takeover attempt.
"This case is going to become a career" for Khan, Sprizzo said after rescheduling the ICN meeting to next year.
The shareholders meeting, originally set for early May, was first put on indefinite hold in the summer and then postponed until Dec. 15 after Khan was given the go-ahead by the U.S. Securities and Exchange Commission to launch a proxy battle to unseat ICN Chairman Milan Panic and the Costa Mesa-based firm's other eight board members.
Rafi M. Khan
Khan had first attempted to launch a proxy battle in April, but was temporarily blocked by Sprizzo. An appeals court later reversed that decision.
Khan, who owns 120,00 shares of ICN stock, maintains that the company's top executives, including Panic, have mismanaged the firm and lived extravagant lives at the expense of shareholders. He promises not to draw a salary if he is elected to the board.
Company officials, however, have painted Kahn as an opportunistic stockbroker with no management experience who wants to take over the company for personal gain--not to better shareholders' investments.
Wednesday's hearing in U.S. District Court was held after Sprizzo stopped Khan's latest signature-gathering attempt on Nov. 26, ruling that Khan was involved in a 1986 scheme to defraud the British government by illegally purchasing an excessive number of shares during the privatization of British Gas PLC.
Sprizzo also ruled that Khan hid his involvement in the British Gas scheme from the SEC when it approved his proxy solicitation application in October. Khan's first cousin, Tahir Khan, and another Khan associate were later convicted in the scheme and were ordered to pay fines.
ICN attorneys successfully argued that Khan, who was never charged, was the scheme's ringleader. They persuaded Sprizzo to derail Khan's proxy fight, nullifying signatures he had already garnered.
But Sprizzo and attorneys in the case on Wednesday worked out a deal in which Khan would amend his written statements to the SEC to reflect the judge's ruling on Khan's participation in the scheme and Khan's denial of any wrongdoing.
Khan's attorney, Robert Hasday, said that his client should be ready to renew his attempt to remove the ICN board by early next week and would be sending out amended proxy statements to shareholders.
"We will file revised materials at the SEC, and we will continue with the proxy fight," Hasday said.
The lawyer also said that he would be filing an appeal of Sprizzo's ruling that Khan was involved in the British Gas scheme. "His finding was very curious," Hasday said.
But ICN spokesman David Calef said company lawyers maintain that Khan was indeed involved in the scheme and that a Scotland Yard investigator testified to Sprizzo that she would arrest Khan if he returned to England.
Khan's case referral to the U.S. Attorney's office could launch a probe into whether Khan lied on the stand during his Nov. 26 testimony when he denied any wrongdoing. Officials at the U.S. Attorney's office were not available Wednesday for comment.