At the end of last year the Securities and Exchange Commission charged former CEO of Stiefel Laboratories with defrauding his employees more than $110 million. Now employees are suing to get their money back.
While negotiating the sale of his company, Charles Stiefel began buying up stock from his employees at prices more than 75% lower than they were about to be worth. Pharmaceutical giant GlaxoSmithKline paid $68,131 per share for stock Stiefel had bought back for $13-16,000.
The SEC alleges that between 2006 and 2008 Stiefel bought more than 1,000 shares of stock from employees at deflated rates. A private equity firm had bought preferred stock based on an equity valuation more than 300 percent higher than that used for stock buybacks. It is rare for the SEC to get involved in stock transactions which are not publicly traded.
A 34-year company veteran involved in the lawsuit, Richard MacKay, says he was told in 2008 that if he did not sell the stock he held, the company might not be interested in buying it back in the future, according to a report by Scott Thurm in the Wall Street Journal. “At Glaxo’s price, the 750 shares Mr. MacKay had sold for roughly $9 million would have been worth $53 million,” the article said.
MacKay “alleges in his suit that the Stiefel family reaped proceeds of $1.6 billion from the Glaxo sale, including more than $250 million for Charles Stiefel.”