SEC Drops Investigation of Trading by ICN, Panic

The Securities and Exchange Commission is dropping its 3-year-old investigation of alleged insider trading by ICN Pharmaceuticals Inc. and its chairman, Milan Panic, lawyers for the Costa Mesa drug company said Monday.

The agency’s inquiry had focused on Panic’s highly publicized 1994 sale of 55,000 company shares, worth $1.2 million, the day after he learned the government wouldn’t approve the sale of ICN’s drug ribavirin as a stand-alone treatment for the serious liver ailment hepatitis C.

The agency, narrowing its investigation, now plans to file a civil lawsuit in U.S. District Court in Los Angeles, claiming ICN failed to make a timely, accurate disclosure of the government’s denial to investors, said Arnold Burns and Greg Mashberg, partners in a New York law firm that represents Panic and the company.

Agency officials wouldn’t comment.

Burns said SEC lawyers alerted the company within the past two weeks that the SEC was pulling back its inquiry. “It’s an enormous victory for Mr. Panic and the company,” Burns said.

Company lawyers said the commission is overriding staff recommendations that Panic be banned as an officer of the company and fined up to $1 million in connection with the insider-trading allegations.

Burns said the commission threw out the insider-trading allegations because evidence shows that Panic made plans to sell the shares weeks before the sale.

“Prior to receiving the information [about ribavirin], he’d already put into the works the sale of the stock,” said Burns, noting that Panic believed when he received the information that the shares had already been sold.

Burns cited recent court cases showing that an insider-trading allegation won’t stand up unless regulators can show that an insider sold stock strictly on the basis of undisclosed information.

In 1977, the SEC sued Panic and the company, alleging securities violations. In 1991, it made similar allegations against Panic and ICN. In both cases Panic and ICN agreed to refrain from violations of securities laws. They admitted no wrongdoing.

ICN lawyers said the agency will sue the company for allegedly failing to fully disclose in a timely manner the government’s decision on ribavirin in November 1994. ICN disclosed the decision the following February, triggering a 41% drop in company stock in six days of trading.

Months later, a committee of ICN directors exonerated Panic of the insider-trading charges. Last year, Panic and the company paid $15 million to settle a shareholder lawsuit over the stock sale.

On Monday, ICN stock closed on the New York Stock Exchange at $15.25, up 38 cents.

Lawyers said the company will disclose changes in the agency’s inquiry in a securities filing within a week. A related investigation by a federal grand jury in Los Angeles continues.

In August, the company disclosed that the grand jury had widened its probe to include possible violations of the U.S. embargo on Yugoslavia through alleged stock sales by Panic and ICN.

The grand jury is also looking into Panic’s sales of assets associated with Yugoslavia and possible omissions or misstatements in federal tax filings. Panic has denied any wrongdoing.