The bankrupt entity KV Pharmaceutical Co. has proposed to pay $12.8 million to settle allegations that it misled investors and artificially inflated the value of its stock, a law firm involved in the case announced Wednesday.
The class-action lawsuit, filed in 2008 in federal court in St. Louis, was led by public employee pension plans of Boston and Norfolk County, Mass. The settlement will not affect the restructured company KV Pharmaceutical, which emerged from bankruptcy last year.
The suit alleges that former officers of the Bridgeton-based drugmaker made false and misleading statements between June 2004 and January 2009 regarding KV’s compliance with federal quality-control standards of the Food and Drug Administration. The false statements pumped up the value of KV stock, the suit alleges, and the stock price plummeted once the alleged fraud became apparent to the market.
KV suspended shipments of FDA-approved drugs in late 2008 and early 2009 because of manufacturing problems and laid off hundreds of workers. KV’s now-defunct Ethex Corp. subsidiary pleaded guilty in 2010 to two felony counts for not telling the FDA about its quality-control problems related to its manufacture of pain medication. Marc Hermelin, KV’s former CEO, pleaded guilty in 2011 to two criminal misdemeanor charges of violating drug labeling law.