"Fast Fred" Hassan's "gifts" just keep on giving, at the holidays, even six years later, it seems. It would appear that several, and perhaps dozens, of the largest pension fund, and investment company, holders of what was legacy Schering-Plough timely "opted out" of the global settlement of the securities class action related to the ENHANCE delayed disclosures. Because they can afford to pay their lawyers (perhaps even by the hour, as opposed to on a contingent fee basis) -- now that the principle has been established, that Merck has some financial exposure here (even though the official settlements deny the same), holders like North Sound Capital (claiming through trades in around 1.57 million shares of legacy Schering-Plough), CFSIL ATF CMLA International Share Fund (an affiliate of Commonwealth Bank, claiming trades in around 500,000 shares) and the United Food Commercial Workers Local 1500 Pension Fund have teamed up to bring their claims against Merck, as the surviving renamed company that once was legacy Schering-Plough.
It would seem that these large holders don't much mind that Merck had exhausted its policy limits in settling this past summer, with those thousands and thousands of mostly smaller traders in the shares during the non-, and partial- disclosure periods, of ENHANCE vintage. Afterall, just because the insurance pool had earlier been tapped out, doesn't mean much when your target is a $47 billion a year in revenue multinational, throwing off ten or more billion in cash flow, each year. Of course some must go to dividends and research in progress, but make no mistake, Merck is very healthy from a financial perspective. So, on balance, I'd predict that these big holders have made a winning bet.
Here's a link to the list of "opt-out" institutional holders, and their holdings -- along with a PDF of the massive 175 page complaint at law (1 Mb download -- don't use cellular bandwidth -- use wi fi!).
I'll bet that they will recover more from Merck (on a per share traded basis), than if they had simply ridden along with the crowd, and accepted the NJDC Case Nos. 08-397 and 08-2177 global settlements. Here's a bit, from the complaint:
. . . .Schering’s numerous disclosures during the Relevant Period were materially false and misleading when made because they failed to disclose the adverse results of ENHANCE, which contradicted the Company’s repeated assertions that the “science” was favoring Zetia and Vytorin, and which were plainly material to investors such as Plaintiffs, as Schering repeatedly recognized in its SEC filings and other public statements. . . .:]
[Senator Charles Grassley's June 8, 2008 letter -- during a Congessional investigation of the ENHANCE delayed disclosures:]
. . . .A heart patient deserves to know if his medicine lowers cholesterol but doesn't change his cardiovascular condition. The decision to take a particular drug is personal, and people have the right to the whole picture.
Drug makers and drug developers violate the public interest when they work to muzzle the scientific process and fight disclosure of newly emerging information about various pharmaceuticals in order to drive up their sales and profits. Everyone wants new life-enhancing and life-saving therapies. . . . [P]atients and others deserve to have information in order to weigh the risks, benefits and unknowns for themselves. . . .
United States Senator
Committee on Finance
We shall see whether this turns out to be a winning investment -- legal fees now, for a larger recovery (per share), later. And of course, we will keep you apprised. In fact, I'm popping the popcorn. Should be entertaining to see Fred Hassan have to give even more depositions "about what he DIDN'T know, and when he didn't know it". Hardly.