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Former KV Chief to Appear on Criminal Charge

Former KV Chief to Appear on Criminal Charge [St. Louis Post-Dispatch]


From St. Louis Post-Dispatch (MO) (March 10, 2011)


March 10--MARC HERMELIN -- the former chief executive of troubled local drug maker KV Pharmaceutical Co. -- is scheduled to appear in federal court today for possible sentencing on at least one criminal charge, according to court records.


Hermelin, who stepped down from the Bridgeton-based company's board of directors in November, is slated to appear at 1 p.m. before U.S. District Judge E. Richard Webber.


The court docket, posted Wednesday, indicates that Hermelin has elected to waive his rights to indictment and trial and instead to plead no contest or guilty to one or more charges. The document indicates he could be sentenced at the same hearing.


No charges have yet been publicly filed against Hermelin, but he has been one of the subjects of a long-running investigation by the U.S. attorney's office and the Food and Drug Administration. The federal investigation has centered on allegations that at least one top manager at KV failed to alert the FDA that it had made and distributed oversize morphine tablets, according to court filings by the U.S. attorney.


KV's wholly owned subsidiary, Ethex Corp., pleaded guilty in March 2010 on two felony counts of criminal fraud for failing to report to the FDA that it was making oversize painkiller tablets that could be dangerous to patients -- and drew $27.6 million in fines and restitution.


Assistant U.S. Attorney Andrew Lay declined to comment on the Hermelin case. Hermelin could not be reached for comment. His lawyer, Peter Safir of the Covington & Burling LLP law firm in Washington, also was unavailable.


By 2008, KV was considered one of the most successful publicly traded companies based in the St. Louis area, posting nearly $600 million in revenue and employing 1,700 people. But the criminal case resulted in a two-year shutdown of KV's production facilities and layoffs of three-quarters of its work force.


KV initiated recalls of oversize morphine tablets in June 2008 but failed to report to the FDA its discovery of oversize tablets of other drugs, including medicine prescribed for irregular heartbeats and also an ingredient used in the attention deficit disorder drug Aderall.


According to criminal charges in the Ethex case, an unidentified KV executive weighed options in July 2008 for responding to the firm's discovery of problems with two additional drugs. Over the objections of other employees, the executive chose the "do nothing option," according to a court filing by the prosecution.


The unidentified executive instructed employees to "minimize written communications about KV's oversize tablet manufacturing problems and limit distribution and discussion of any documents discussing these problems," according to the prosecution.


Hermelin, former chairman of KV, was ousted as chief executive in December 2008 as the result of a company board investigation into mismanagement. In November 2010, he also ran afoul of the federal Department of Health and Human Services, becoming the first drug company executive banned from doing business with Medicare and Medicaid -- a staple for any drug maker. As part of his agreement with the agency's Office of Inspector General, he resigned as trustee of all family trusts that own KV stock, promptly divested himself of all voting interests in the company and agreed to divest his stock in the company over a timetable that neither KV or the agency has made public.


Robert Patrick of the Post-Dispatch contributed to this report.


To see more of the St. Louis Post-Dispatch, or to subscribe to the newspaper, go to http://www.stltoday.com.


Copyright (c) 2011, St. Louis Post-Dispatch


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Posted: March 2011


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