'Corporate Puffery' Does Not Justify Shareholder Lawsuit
Court sends message about turning bad news into a viable lawsuit.
December 31, 2009 at 07:00 PM
5 minute read
Omnicare, America's largest pharmaceutical provider for the elderly, was just trying to conduct business as usual. The company released a standard press statement in August 2005 saying it was working to adopt a new government program–Medicare Part D–and did not foresee any problems. A short time later, CEO Joel Gemunder said he felt confident the forthcoming transition would not harm the company.
But Omnicare did not properly educate its drug-plan suppliers on pharmacy care practices and ran into database problems related to the program. These errors cost the company $9.8 million during the switch to Plan D.
The Plan D mishap–coupled with instances of the company delivering questionable earnings reports and predictions–prompted a group of Omnicare shareholders to sue the company and its executives for Securities Act fraud, claiming they made false statements that led to stock drops.
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