SEC says GSK unit CEO defrauded shareholders

The USA’s Securities and Exchange Commission says it has charged a subsidiary of UK pharma giant GlaxoSmithKline (LSE: GSK) and the subsidiary’s former chairman and chief executive with defrauding employees and other shareholders in the company’s stock plan by buying back their stock at severely undervalued prices.

The SEC alleges that Florida-based Stiefel Laboratories, which was a family-owned business prior to being purchased by GSK for $2.9 billion plus a further $300 million contingent on performance two years ago (The Pharma Letter April 20, 2009), used low valuations for stock buybacks from November 2006 to April 2009.

According to the SEC, Stiefel Labs omitted key information that would have alerted employees that their stock was actually worth much more. Instead, the information was confined to then-chief executive Charles Stiefel and certain members of his family as well as some senior management. At the time, Stiefel Labs was the world’s largest private manufacturer of dermatology products.