Sanofi Hammered Over Pension Plan Losses

     (CN) – Sanofi-Aventis employees whose retirement plans took a hit from the 20 percent drop in company stock say in federal court that the pharmaceutical company had been quietly investigating kickbacks for years.
     Joseph Forte filed a class action Wednesday in Manhattan against four fiduciaries of the Sanofi U.S. Group Savings Plan, plus two individual representatives of those defendants.
     On behalf of other former Sanofi-Aventis employees, Forte seeks “to recover[] millions of dollars of damage suffered in [employee] retirement accounts due to breaches of fiduciary duties owed to them.”
     “Defendants breached their fiduciary duties under ERISA by continuing to permit the Stock Fund to be an investment option for Plan participants despite knowing that it had become an imprudent investment,” the complaint states, abbreviating the Employee Retirement Income Security Act.
     Sanofi allegedly failed to inform investors of an internal investigation into massive illegal kickbacks related to the sale of its lucrative diabetes drugs, especially in the Middle East and Africa.
     The company began its internal investigation in March 2013 and ultimately fired Sanofi CEO Christopher Viehbacher on Oct. 29, 2014, but the truth was not made public until a former paralegal filed a whistle-blower lawsuit this past December.
     Diane Ponte’s lawsuit sent Sanofi’s stock price on a nearly 20 percent drop, from approximately $54 per share to $45 per share.
     This week’s lawsuit summarizes Ponte’s action as alleging that “Sanofi’s executives knowingly paid illegal kickbacks to induce purchases of its drugs by U.S. retail pharmacies, and concealed the payments by miscoding them as various expenses.”
     Ponte “alleged that the false coding of the payments was done intentionally to escape detection and avoid the required financing, purchase and legal departmental approvals,” the complaint states. “She also alleged that at least $34 million in illegal payments were made, and raised an issue over possibly $1 billion in ‘missing funds.'”
     Forte claims that representatives with the pension plan’s fiduciaries, the U.S. Pension Committee and the Administrative Committee, knew about the illegal cash payments before Ponte blew the whistle.
     Such knowledge told the plan administrator and Sanofi treasurer that company stock was inflated and was an imprudent investment.
     “Based on their knowledge, defendants could have, and should have, taken action to protect the plan and its participants,” the complaint states. “They could have made the Stock Fund unavailable as an investment option while the stock remained artificially inflated. They also could have disclosed what they knew regarding the imprudence of the Stock Fund to their co-fiduciaries as well as to the Sanofi Board of Directors, which was responsible for overseeing the U.S. Pension Committee.”
     Such disclosure might led Sanofi to go public sooner, corrected its misrepresentations sooner thus preventing the stock from trading at as high a price as it did, according to the complaint.
     “The longer the artifice continues uncorrected, and the more delayed the disclosure of the truth, then the greater the damage when the truth is finally revealed,” Forte says. “Here, plan participants who purchased stock fund shares at an artificially high price were harmed regardless of what happened to the stock in the future; their losses were greater than they otherwise would have been, and even any future profits they might earn will be less than they otherwise would have been, all because they bought their shares at an artificially inflated price.”
     Forte claims that disclosure delay cost Sanofi’s employees millions of dollars in retirement savings, for which defendants should be held responsible.
     He is represented by Samuel Bonderoff with Zamansky LLC in New York.
     Sanofi shares opened Friday at $51.46.

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