Coral Gables' Stiefel Laboratories is accused of duping employees into selling their shares back to the company for far less than their value before the April announcement of a blockbuster deal with London-based GlaxoSmithKline.

A federal lawsuit seeking class-action status alleges Stiefel employees lost out on $226 million by selling the shares for about a quarter of their actual value before GlaxoSmithKline agreed to buy Stiefel for as much as $3.6 billion. The class is estimated to be more than 200 people.

Stiefel was still reviewing the suit, but disagrees with the allegations, Devin Buckley, the company's general counsel, said Wednesday.

Said Norman S. Segall, a Ruden McClosky lawyer who filed the suit on behalf of three former Stiefel employees: ``It's really unfortunate that a company took advantage of its employees, who worked long and hard to accumulate the shares in their retirement fund.''

Stiefel, which has been South Florida's largest pharmaceutical company, specializes in dermatology products. Its brands include Duac, for acne, and Soriantane, for treatment of severe psoriasis. The 162-year-old company generated about $900 million in revenue last year.

According to the lawsuit, Stiefel made contributions of company shares to an employee stock plan so workers could participate in the company's growth. Stiefel had about 3,000 employees, including 60 in Coral Gables, The Miami Herald reported in April.

Until November, Stiefel employees couldn't redeem their shares unless they left the company, retired or died. They also had the option not to sell.

Discussions to sell Stiefel started in November, according to the suit. At that point, Segall said, Stiefel took steps to reacquire employees' shares on the cheap.

On Nov. 21, Stiefel combined its employee stock plan with its 401(k) plan -- giving workers the option of selling their stock without leaving the company. The company promoted the combination to employees as an ''opportunity to diversify'' by selling their shares back to Stiefel, the suit charges.

Company shares were valued at $16,469 each, based on a March 2008 valuation by an outside accountant who wasn't a qualified appraiser, according to the suit.

The suit adds the valuation didn't consider investment firm Blackstone Group's purchase of a stake in Stiefel in 2007. Blackstone paid $500 million, or about $60,000 a share, for newly issued preferred shares, the suit says. Blackstone held a 19 percent interest in Stiefel.

The suit alleges Stiefel also terminated ``numerous employees in late 2008 for the purpose of causing those people to [sell] their shares to the company at the March 31, 2008, valuation.''

Stiefel repeatedly assured employees the company was not for sale, the suit says, and never imposed a ''blackout period'' for buying back stock from employees prior to the announcement of the GlaxoSmithKline deal.

Stiefel bought back 4,355 shares in the first three months of this year for $16,469 each, according to the suit.

In April, GlaxoSmithKline agreed to buy Stiefel for about $2.9 billion in cash, or $68,515 a share, plus about $400 million in debt. GlaxoSmithKline also agreed to pay up to an additional $300 million, depending on performance. The sale is expected to close by the end of October.

The suit was filed Monday by three former Stiefel employees: Marion Burk of Miami, James A. Bacon of Pembroke Pines and Karl F. Popp of Schodack Landing, N.Y. They accuse the company and its chairman and CEO, Charles Stiefel, of securities fraud. Other directors are accused of breaching their fiduciary duty.

''They want the value of the shares that everybody else is getting,'' Segall said of the former employees.

Join the discussion

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. In order to post comments, you must be a registered user of MiamiHerald.com. Your username will show along with the comments you post. Thank you for taking the time to offer your thoughts.

     Showing: Oldest first Newest first Most-recommended first Least-recommended first

@Nyx.AuthorDisplayName@ wrote on @Nyx.PostedAtTime@:

@Nyx.repliedToText@

@Nyx.replyAnswerText@

Reply to this Comment @Nyx.Recommender@ @Nyx.AbuseReporter@