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.
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Posted: March 2011
