Valeant Pharmaceuticals International's former president must repay the drug maker at least $4.8 million over a bonus tied to a unit's aborted spinoff, a Delaware judge has ruled.
Valeant directors, led by former Chief Executive Milan Panic, violated their duties to shareholders by awarding the bonus to Adam Jerney after the company sold 20% of its Ribapharm hepatitis drug unit to the public, Chancery Judge Stephen Lamb found. A planned spinoff was later abandoned.
The "decision to pay cash bonuses was ill-advised and was not entirely fair to the company," Lamb wrote in a 47-page decision released Thursday. The process for deciding who got the cash awards "was deeply flawed with self-interest."
Aliso Viejo-based Valeant, formerly known as ICN Pharmaceuticals Inc., took over a lawsuit originally filed in Wilmington, Del., by shareholders. Panic, who stepped down from the company in June 2002, agreed in August to pay $20 million to settle claims over his $33-million bonus.
Angie McCabe, a Valeant spokeswoman, and Jesse Finkelstein, one of Jerney's lawyers, didn't return calls for comment.
In the lawsuit, investors argued that Panic, Jerney and other directors didn't deserve bonuses for the Ribapharm initial public offering because working on the sale was part of their regular duties. The unit's spinoff was blocked after shareholders elected dissident directors to the Valeant board.
Lamb concluded that Jerney must return the $3-million bonus received as part of the IPO, as well as $1.8 million the company paid for his legal bills.
The judge said that Jerney also would be assessed for interest he reaped on the bonus since 2002 and that he faced damages for violating his duties to shareholders.