After two years of legal jostling, an agreement was reached to settle a class-action lawsuit accusing a Michigan pharmaceutical company of misleading thousands of investors. According to MLive-The Flint Journal, a federal judge finalized the $14.1 million award to investors who purchased the company’s stock during its trading periods from Feb. 29, 2016 to Nov. 6, 2016.
The settlement represents approximately 6% or 7% of the maximum damages that the represented class is estimated to have lost from their stock purchase and sale transactions. After the award decision, the company issued a press release regarding its options in moving forward, such as through a merger or sale.
The pharmaceutical company provides specialty drugs to patients suffering from chronic diseases such as hepatitis and cancer. On Nov. 10, 2016, investors filed a lawsuit against the company alleging federal securities violation. The suit accused the company of issuing press releases containing false or misleading information that artificially inflated its stock prices.
While the company’s press releases touted having “successful years,” it failed to disclose ongoing disputes with one of its prescription benefit managers.
Purportedly, the company was unable to control its financial reporting and could not calculate the prices it received for direct and indirect remuneration through Medicaid Part D plans. In its defense, the company’s legal team argued that investors could not prove that officers knew of any fraudulent activity or wrong accounting estimates.
Securities violations are a serious matter that causes harm not only to investors, but the trust and integrity of the public stock markets. In 2017, there were 432 lawsuits filed on behalf of investors alleging false or misleading statements, as reported by Reuters. When company officials engage in deception, such as through misrepresentation or omissions regarding its financial reporting, a securities fraud class action may help in recovering losses from stock prices that were falsely inflated.