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In The Blink Of An Eye … Along Comes A Securities Fraud Suit

In last week’s roundup (see here) it was noted that on Monday August 9th, SciClone Pharmaceuticals Inc. disclosed in an 10-Q filing as follows:

“On August 5, 2010 SciClone was contacted by the SEC and advised that the SEC has initiated a formal, non-public investigation of SciClone. In connection with this investigation, the SEC issued a subpoena to SciClone requesting a variety of documents and other information. The subpoena requests documents relating to a range of matters including interactions with regulators and government-owned entities in China, activities relating to sales in China and documents relating to certain company financial and other disclosures. On August 6, 2010, the Company received a letter from the DOJ indicating that the DOJ was investigating Foreign Corrupt Practices Act issues in the pharmaceutical industry generally, and had received information about the Company’s practices suggesting possible violations.”

As indicated in the prior post, news of the FCPA inquiry sent SciClone’s shares, at one point, down 41% to a 52 week low.

As indicated in this press release on Friday, August 13th, Kahn Swick & Foti, LLC and Former Louisiana Attorney General Charles C. Foti, Jr. filed a securities fraud class action lawsuit against SciClone in the United States District Court for the Northern District of California, on behalf of purchasers of the common stock of the Company between May 11, 2009 and August 10, 2010.

As noted in the law firm release,

“The Complaint alleges that throughout the Class Period, defendants were engaged in illegal and improper sales and marketing activities in China and abroad regarding its products. This ultimately caused the Company to become the focus of a joint investigation by the Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”) for possible violations of the Foreign Corrupt Practices Act (“FCPA”). It was only at the end of the Class Period, however, that investors ultimately learned the truth about the Company’s operations after it was reported that the SEC and DOJ were investigating the Company for violations of the FCPA. At that time, shares of the Company declined almost 40% in the single trading day, on abnormally large trading volume.”

This has got to set a record for the least amount of time between disclosure of an FCPA inquiry and collateral civil litigation …. less than 100 hours!

As Nathan Vardi at Forbes correctly notes (see here) plaintiff lawyers have indeed “joined the bribery racket.” (In April, Vardi penned a provocative feature article – “The Bribery Racket.” See here for my prior post which links to the article).

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