The Securities and Exchange Commission (SEC) has charged GlaxoSmithKline’s subsidiary, Stiefel Laboratories and its former CEO, Charles Stiefel with defrauding employees and other shareholders in the company’s stock plan.
According to SEC, prior to Stiefel Labs being purchased by GlaxoSmithKline, the company used low valuations for stock buybacks by deleting crucial information that would have made known to the employees the high worth of their stock from November 2006 to April 2009.
SEC said that between November 2006 and April 2007, the company purchased more than 750 shares of company stock from shareholders at a price of $13,012 per share.
The company also purchased over 350 additional shares of company stock from shareholders at $14,517 per share between late July 2007 and June 2008.
The SEC further alleges that between December 2008 and April 2009, Stiefel had purchased more than 800 shares of its stock from shareholders at $16,469 a share after which the company was acquired by GlaxoSmithKline for a value that amounted to more than $68,000 per share.
The acquisition price was more than 300% higher than the per share price that Stiefel had been paying to buy back shares from its shareholders.
SEC’s Miami Regional Office director Eric Bustillo said that the company and its former CEO profited at the expense of their employee shareholders who lost more than $110m.
Bustillo added: "Private companies and their officers must understand that they are not immune from the federal securities laws, which protect all shareholders regardless of whether they bought stock in the open market or earned shares through a company’s stock plan."
The SEC has sought for permanent injunctions, expulsion of ill-gotten gains with prejudgment interest, and financial penalties.