More Details Emerge -- From Schering-Plough's $165 Million Settlement of 2001-Era Securities Fraud Class Action

At the top, let me note that this figure -- $165 million -- (if approved), would place this Schering-Plough settlement among the top five highest securities fraud recoveries ever -- in New Jersey. Wow.

Yesterday, the formal motions to approve the above settlement of a 2001-era Clarinex "non-launch" securities fraud class action -- and the related briefs -- were filed in the federal district courthouse in Newark, New Jersey. Below are some of the details, of what it takes to conduct an eight-year litigation juggernaut, and, in return, the plaintiffs' lawyers will -- if the settlement is approved as presented -- average about $575 per hour, for every hour spent prosecuting In Re Schering-Plough Securities Litigation (NJ Dist. Ct., Case No. 01-829 Judge Hayden). Not bad. And, getting the lesser of (a) the difference between $37.68 per share, and the price per share at which the injured shareholder actually sold his/her shares, or (b) or a little over $7.14 per share, is a very large, and clear win, for the shareholders.

Remember that when then-CEO Kogan departed, in the wake of the Clarinex "non-launch" debacle Schering-Plough common stock was trading at about $17.20 a share. Here's a partial listing of what it took to get to this point -- from the briefs:

. . . .Lead Counsel had: (1) filed its Consolidated Class Action Complaint (“Complaint”) after conducting an extensive factual investigation (id. at ¶ 17); (2) successfully opposed Defendants’ motion to dismiss (id. at ¶¶18-20); (3) successfully sought certification of the Class (id. at ¶¶27-32); (4) conducted extensive fact discovery, which included a review of over 600,000 pages of documents produced by Defendants and third parties and the taking of 32 depositions of fact witnesses (id. at ¶¶49, 54-56, 148); (5) served five expert reports and conducted expert discovery, including depositions of each of Defendants’ ten experts (id. at ¶¶78-85); (6) disseminated the Notice of Pendency of Class Action to over 280,000 potential members of the Class (id. at ¶¶86-87); (7) fully briefed the parties’ motions for summary judgment (id. at ¶¶88-98); and (8) engaged, under the supervision of a well-respected mediator, in mediation sessions involving sophisticated and contentious negotiations with Defendants that stretched over a multi-year period (id. at ¶¶99-108). . . .

Just a few observations, as I close here: (1) prior to announcing the Sch-Merck merger, CEO Hassan had been presiding over a stock with a recent $17-something handle (having dipped below $14 for a time). (2) It is possible -- likely, even -- that the ENHANCE-related securities fraud litigation will generate recoveries that dwarf this $165 million -- as the stock-losses were proportionately larger. And (3) I mention the more than 65,000 hours the plaintiffs' lawters spent -- at over $575 per hour, here -- to highlight the fact that, in such litigation, it is the company that effectively pays the plaintiffs' lawyers. Just one more unwelcome gift CEO Hassan will have left behind, when he departs with his own greater than $100 million bounty (if the reverse merger closes on the present terms -- in early 2010).

Actually, I think CEO Hassan's massive golden parachute ought to be held in escrow, and then ultimately reduced by the aggregate recoveries from all of the litigation that arose as a result of his poor decision-making skills. But that's just me. Your mileage may vary. In fact, I am pretty sure it does.