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Business litigation possible for 2 New Jersey drug companies

Two New Jersey companies have seen the arrest of top executives in recent days. A biotech drug manufacturer, Celgene Corp., based in Summit, and a French based pharmaceutical company, Sanofi-Aventis, whose United States headquarters are located in Bridgewater both had financial executives that have been charged with insider trading. There were four other people arrested in connection with the same case. In the aftermath of these arrests, the companies may find themselves subject to civil business litigation from their investors.

According to federal prosecutors, the people who were arrested were allegedly passing sensitive company information such as financial information, merger and acquisition plans, and regulatory applications to others. Those others would then allegedly take the information and make stock purchases or sales depending on the information. They have been charged with multiple counts of securities fraud and conspiracy.

Both Celgene Corp and Sanofi-Aventis are cooperating with the federal investigation. A spokesman for Celgene Corp. has said that they believe the investigation did not involve the company itself, just the employee that was arrested. Regardless of the companies' innocence in the matter, there may be investors who feel the companies are responsible.

In that case, the companies have been exposed to the possibility of business litigation from nervous or skeptical investors who may think the companies were complicit in the crimes of their executives. Anytime criminal behavior is exposed at the highest levels of a company, investors seem to get nervous. Any New Jersey company that finds itself in this situation may want to make sure they are transparent and cooperative with any investigation not only because the company is a victim in the subterfuge also, but to help squelch any investor fears. It is at times like this that companies need to seek advice and assistance to ensure they are protected at the same time they are cooperative. This can be a delicate balance, especially in a company that deals with proprietary products and information.

Source: Bloomberg Businessweek, "NJ drug company execs charged with insider trading," Linda A. Johnson, Nov. 19, 2012

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