Par Pharmaceutical to Pay Shareholders $8.1M

     (CN) – Par Pharmaceutical will pay shareholders $8.1 million to settle claims that it understated its finances by about $93 million, according to a deal approved late last month.
     U.S. District Judge Esther Salas approved the settlement of a federal class action accusing the New Jersey-based drug company of lying about its financial performance and prospects for years.
     In July 2006, Par said it would be restating its financial statements for 2004, 2005 and part of 2006 to correct “an understatement of accounts receivable reserves which resulted primarily from delays in recognizing customer credit cards and uncollectible customer deductions.”
     The announcement caused Par common stock to drop from $18.25 to $13.47 per share, according to investors. Months later, the drug developer announced plans to restate its pre-2004 financial statements, and in 2007 it filed restatements for 2001 to 2006.
     In doing so, Par admitted that it had understated its accounts receivable reserves by more than $83.5 million and had overvalued its inventories by more than $9.9 million, according to the complaint.
     Investors, led by the Louisiana Municipal Employees Retirement System (LAMPERS), sued Par and two former executives in New Jersey Federal Court for alleged securities fraud.
     Par later agreed to settle the case for $8.1 million — about 7 percent of total class-wide damages, according to the ruling.
     Salas approved the settlement on July 29, holding that it met all nine factors identified by the 3rd Circuit in Girsh v. Jepson.
     “This matter has been pending for seven years, and even if lead plaintiff were to succeed at trial, ‘necessary delay through a trial, post-trial motions, and the appellate process would likely deny the class any recovery for years, an unfavorable result for all parties,'” Salas wrote.
     None of the 8,186 potential class members objected to the settlement, and no exclusion requests were received after lead counsel Berman DeValerio sent 76,386 notice packets on behalf of banks, brokers and other nominees, the unpublished opinion states.
     The settlement was reached only after “extensive factual investigation and comprehensive legal briefing,” Salas wrote.
     She also granted DeValerio’s request for $2.43 million – or 30 percent of the settlement fund – in attorney’s fees and nearly $600,000 in litigation costs, and approved an $18,000 compensatory award to LAMPERS.
     “Lead counsel ‘received, reviewed, and analyzed hundreds of thousands of pages of relevant documents,'” Salas wrote. “Lead counsel engaged in highly-involved factual and legal investigations, which included interviewing former Par employees and retaining an experienced economist to assess likely damages.”
     Par had a market capitalization of about $1.2 billion and reported $162.5 million of cash equivalents at the end of 2011, according to the ruling.

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