WASHINGTON (AP) — The Securities and Exchange Commission has charged the former CEO of a company recently purchased by GlaxoSmithKline with defrauding employees and shareholders by buying back the company's stock at undervalued prices.
In July 2009 GlaxoSmithKline purchased dermatology products company Stiefel Laboratories Inc. for $2.9 billion. Before the acquisition, the family-owned Steifel was the largest private manufacturer of dermatology products in the world.
SEC lawyers allege that between November 2006 and April 2009, Steifel and its CEO Charles Steifel withheld key information from employees about the value of the company's stock plan. At the same time Steifel purchased thousands of shares of company stock at undervalued prices.
"Stiefel Labs and Charles Stiefel profited at the expense of their employee shareholders who lost more than $110 million by selling their stock based on the misleading valuations they were provided," said Eric Bustillo, director of the SEC's Miami regional office.
As late of March 2009, SEC lawyers say Steifel misled shareholders to believe the company would remain family-owned, even as he was finalizing its sale to London-based GlaxoSmithKline.
When the transaction was announced the following month, the deal valued Steifel Laboratories at $68,000 per share, which was more than 300 percent higher than the price Steifel had paid to repurchase shares from its stockholders.
Steifel Laboratories' prescription and over-the-counter medications including acne treatments, skin creams, lotions, washes and vitamins. The government's complaint was filed in the U.S. District Court for the Southern District of Florida. Steifel was based in Coral Gables, Fla.
Lawyers representing Steifel were not immediately available for comment Monday.