This should be moderately good news for New Merck (depending on the size of the damages) -- as New Merck is starting to put the 2007-2008 ENHANCE debacle in its rear view mirror. It still has to finish swallowing the bitter pill that Hassan fed it, in the form of legacy Schering-Plough, though.
On September 12, 2011, I mentioned that Hans Becherer, a former Schering-Plough director, had been ordered to sit for a deposition, under oath, before Halloween 2011, in the ENHANCE-related shareholders' derivative action pending in the federal District Court for New Jersey, called Cain v. Hassan (08-cv-1022 DMC-JAC). In addition to Mr. Becherer, ex-directors Patricia Russo, Thomas Colligan, Carl Mundy, Kathryn Turner, Phillip Leder and Robert Van Oort were also to be deposed by October 31, 2011 under this prior court order. They were all members of legacy Schering-Plough's Compensation Committee.
Recall also that Mr. Becherer was the Chairman of the Compensation Committee at the time when then-CEO Fred Hassan (and each of the other top six officers of Schering-Plough) were granted a special bolus of stock options, at what the company contemporaneously, and very-publicly claimed were "artifically deflated" prices (due, Mr. Hassan then preposterously said, to "unwarranted confusion" -- out of the long-delayed ENHANCE null-results). In contrast, the graphic below, right, in SGP NYSE stock-price trading terms, told the actual truth. There was no confusion; save the confusion caused by Schering-Plough's delay in releasing the disastrous reults of ENHANCE. But still, Mr. Hassan felt comfortable taking advantage of this supposed "confusion", helping himself and his officers to extra cheap stock options. Disgusting -- and shockingly self-serving.
A terse one page letter (a small PDF download) filed in the federal court sitting in Newark this morning indicates that the parties (subject only to New Merck board approval, and the court's blessing) have agreed in principle to settle this matter. All depositions have been stayed -- pending the settlement's acceptance, by a one page order from the court, also entered this morning, in Newark.
No mention (yet) of the size of the payment to be made to legacy Schering-Plough shareholders (and, in some cases, to some New Merck shareholders, via the merger contortions).
It simply cannot be ignored that this case had been pending since the early part of 2008, and only now -- on the eve of a series of sworn, and cross-examined, Compensation Committee Chairman/Board of Director statements -- does the case get settled. Recall that each of the directors, and most of the executive officers of legacy Schering-Plough, were sued personally -- and, if found liable, would be on the hook, personally, for these alleged damages. That is significant. When the settlement terms and figures are made public, we will report them.
Still pending are the federal securities claims in two ENHANCE matters where the plaintiffs' lawyers are seeking class certification. So, New Merck is far from out of the ENHANCE woods, yet.
Do stay tuned. We will follow this -- as we have, for going on four years now.