Former family business head Charles Stiefel, who made a fortune when GlaxoSmithKline bought Stiefel Laboratories in April 2009, has been accused of defrauding the company’s staff.
According to a lawsuit filed by the Securities and Exchange Commission, Stiefel, who sold the family-controlled business for $2.9 billion (€2.2 billion), cheated former employees out of millions by withholding information about the business, including GSK’s potential acquisition, when buying back staff shares at low prices.
“Stiefel Labs and Charles Stiefel profited at the expense of their employee shareholders who lost more than $110 million by selling their stock based on the misleading valuations they were provided,” said Eric Bustillo, director of the SEC’s Miami regional office.
In a statement, the SEC said Stiefel Labs decided to seek acquisition bids from pharmaceutical companies in November 2008, with GSK expressing an interest in January 2009.
Between 3 December 2008 and 1 April 2009, the company purchased more than 800 shares from investors at $16,469 each. According to the SEC, Stiefel “knew that [the] equity valuation was low and misleading”.
GSK acquired the company on 20 April 2009 for more than $68,000 per share – four times the price shareholders received in the buyback programme.
The SEC added that even as late as March 2009, Stiefel misled shareholders to believe the company would remain in the family’s control and ordered ongoing negotiations not be disclosed to employees.
“Private companies and their officers must understand that they are not immune from the federal securities laws, which protect all shareholders regardless of whether they bought stock in the open market or earned shares through a company’s stock plan,” said Bustillo.
Before being taken over by GSK, Stiefel Labs was the largest privately owned maker of skincare products, with revenues of about $1 billion.
When contacted GSK, which disclosed the allegations in its annual report, said there was no suggestion it had acted improperly.
The spokeswoman added: “The suit filed … by the SEC relates to Stiefel: Stiefel denies that it or Charlie Stiefel acted improperly or did anything to violate the securities laws. Stiefel intends to vigorously defend itself against the SEC’s complaint.”
Stiefel Labs’ origins lie in a German company founded in 1847 by John David Stiefel, Ferdinand von Hebra and Paul Unna. John David Stiefel’s grandson August brought the business to the US in the 20th century.