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Sunday, July 14, 2024 | Back issues
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Suit Says Walgreen Hides Inconvenient Facts

CHICAGO (CN) - Walgreen's proposed reorganization plan fails to address the impact of allegations of malfeasance made against the against the company's highest officers by its former CFO, a class action claims.

James Hays filed the federal class action on Dec. 5 against Walgreen Co., 14 of its corporate officers, and Walgreens Boots Alliance.

The complaint stems from Walgreen's announcement on August 6, 2014, that it was reducing its 2016 projected pharmacy earnings by $1.1 billion, which caused its share price to fall nearly 15 percent.

A short time later, former Walgreen CFO Wade Miquelon claimed in court that he was wrongly made the scapegoat for a "shocking" calculation error leading to the reduction.

Miquelon claimed that he pushed CEO Gregory Wasson and director Steven Pessina to revise the forecast earlier, as market-related issues made the company unable to meet its goal, but activist investors threatened Miquelon if he did not recommend raising, rather than lowering, the forecast.

The allegations became public shortly before Walgreen filed documents with the SEC ahead of its corporate reorganization in connection with the acquisition of Alliance Boots, a European pharmacy company.

Despite the serious allegations in the defamation complaint leveled at Pessina, whose ownership stake in and influence over the company will increase significantly if the share issuance is consummated, neither the S-4 nor the proxy even address those allegations," Hays says.

"In fact, both the S-4 and the proxy fail to even reference the existence of the pending lawsuit filed by the company's former CFO. Moreover, the S-4 and the proxy do not disclose the impact of the company's reorganization on any potential derivative liability arising from the allegations against Walgreen's directors and officers in the defamation complaint," he continues.

Hays claims such information is material to shareholders' vote on the proposed reorganization plan, as is other missing information, such as the board's motivation to accelerate the acquisition of Alliance Boots, and Pessina's final ownership stake in the company upon completion of the reorganization.

The complaint also seeks information regarding the Board's decision to add a representative of activist hedge fund JANA Partners to the Board, predicated on an agreement obligating JANA to support the accelerated acquisition.

Hays asks the court to enjoin Walgreen from convening a shareholder special meeting until the company supplements its S-4 and proxy statement to remedy the missing or misleading information.

He is represented by Patrick Dahlstrom with Pomerantz LLP in Chicago, Gutavo Bruckner and Ofer Ganot with Pomerantz's New York office, Jeremy Friedman and Spencer Oster with Friedman Oster in New York, and Alfred Yates in Pittsburgh.

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