Ex-CEO “Fast” Fred Hassan And Team Exhausted D&O Policy Limits, Via The ENHANCE Federal Securities Class Actions

Well. . . “that kinda’ makes ya’ proud, right? No?” — um. . . no.

We learned overnight that the executive officers of legacy Schering-Plough, led by “Fast” Fred Hassan, were able to completely exhaust all the directors’ and officers’ liability insurance coverage available in defending, and ultimately settling the Manson case — the ENHANCE federal securities class action brought against Schering-Plough, Mr. Hassan, most of his directors, and several of his officers.

That fact has never been disclosed before. Merck disclosed it overnight, as it filed its 2012 SEC Form 10-K, on page 111. I suspect that the below-sentence was written largely to mollify the plaintiffs’ class action lawyers, who wanted to be sure that the settled damages — due (allegedly) to Mr. Hassan’s conduct were as fullsome as humanly possible, and that — at a minimum — these plaintiff-shareholders got the full benefit of all the D&O insurance premiums they (through legacy Schering-Plough’s expense deductions) had paid in, for all those years.

Interestingly, no similar disclosure is made in the SEC Form 10-K description of the Merck ENHANCE matters, called Gennessee. Of course, we now know that Merck’s share of the settled damages was about a third the size of legacy Schering-Plough’s. It is my opinion that these fractions roughly approximate the relative fault of the two companies in the ENHANCE matters. So it would make sense that the plaintiffs’ lawyers were unable to extract the full D&O policy limits, as to the allegations of federal securities law violations, related to Merck and several of its current and former officers and directors.

All I can say at this point is. . . “Bausch + Lomb shareholders: you’ve been warned.” If you choose to buy, in some future IPO of B + L, know that you are inheriting many of the same executive officers — essentially the same legacy Schering-Plough officers (allegedly) responsible for the above ENHANCE securities debacles. Yes, you’ve been warned. [Interestingly, hundreds of computers residing inside B + L’s corporate backbone have made frequent, and repeated, visits to this site, this week, by the way — so this is also a “shout-out” to them. Hola!]

In any event, here is the sentence from the 10-K, just filed:

. . . .The settlement is subject to court approval. If approved, this settlement will exhaust the remaining Directors and Officers insurance coverage applicable to the Vytorin lawsuits brought by the legacy Schering-Plough shareholders. . . .

I’ll be back later today, to reset the upcoming bellwether Fosamax trials calendar, as a result of the newly-filed litigation footnotes to the 2012 financial statements. As a teaser, there are now over 3,330 Fosamax femur fracture cases pending — and that’s in addition to the over 4,560 cases alleging jaw bone death. So — at least 7,800 individual cases. Wow. Do stay tuned.


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