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BOLAR FORMER CEO SHULMAN EXPECTED TO PLEAD GUILTY TO CONSPIRACY, FRAUD AND OBSTRUCTION CHARGES; RIVERS AND OTHER BOLAR EXECS NAMED IN CHARGES FILED OCT. 10

Executive Summary

Former Bolar CEO Robert Shulman reportedly will plead guilty to charges of conspiracy, fraud, and obstruction of justice contained in a criminal information filed by the Justice Department in Baltimore federal court on Oct. 10. Shulman waived his right to a grand jury indictment, the Justice Department said, and is reportedly cooperating with the government. Shulman faces five counts: one count of conspiracy, two counts of making false statements, one count of wire fraud, and one count of obstruction of justice. An arraignment date has not been set, although it is expected by the end of October. In addition to the conspiracy charge, Justice alleges that Shulman: "corruptly persuaded" former PharmaKinetics Chief Scientific Officer Mark Perkal, PhD, to allow the removal of retained samples submitted by Bolar that were in fact SmithKline's Dyazide ("The Pink Sheet" June 24, T&G-15); "falsely denied that Bolar had submitted fraudulent information to the FDA" in a September 1989 press release; presented FDA with a false production record for Dyazide in August 1989; and "directed three Bolar chemists to" lie to FDA. Three other former Bolar excess were indicted by a grand jury Oct. 10 as the Justice Department crowned its investigation of the Copiague, N.Y. generic firm by lodging charges against its former top officers. Former Exec VP Jack Rivers faces 10 counts, including one count of conspiracy, six counts of making false statements to FDA, and three counts of obstruction of FDA investigations. Former VP- Operations Charles Dicola faces one count of conspiracy and five counts of shipping adulterated generic products with intend to defraud. Former Director of Quality Assurance Arnold Mendell faces one count of conspiracy, four counts of shipping adulterated products, and four counts of obstruction. Each of the counts against the four men carries a maximum penalty of five years in prison and a $ 250,000 fine, except for the adulterated product charges. They carry a maximum penalty of three years in prison and a $ 250,000 fine. The alleged conspiracy began with the passage of the Waxman- Hatch Act in September 1984 and Bolar's submission of 67 ANDAs soon thereafter, the Justice Department maintains, and continued until February 1990 when Shulman and Rivers resigned. "It was the essence of this conspiracy that in order to maximize Bolar's profits, its members attempted to evade, defeat, and obstruct FDA's regulatory requirements governing the approval, manufacture and distribution of generic drug products," the Justice Department alleges. Among the 81 "overt acts" alleged to have been committed by members of the conspiracy are the preparation and submission of fraudulent ANDAs; submissions of innovator drugs disguised as Bolar's for bio-equivalence testing; the devising and directing of a system to maintain dual production records to fool FDA inspectors; and "extensive efforts to obstruct FDA's exercise of its regulatory authority," including making false statements and directing employees to lie, fabricating documents, concealing samples, destroying documents and samples, and deleting data from Bolar computers. The Maryland U.S. Attorney's Office has now brought charges against eight former Bolar officials, including former Regulatory Affairs Director Susan Long, Regulatory Affairs Manager Gloria Schetlick, R&D Director Gena Finelli and Product Development Manager Juan Rodriguez. Bolar continues to operate under new management led by founder and former Chief Financial Officer Larry Raisfeld. The company has settled criminal charges and three lawsuits so far this year for a total of $ 74 mil. ("The Pink Sheet" Sept. 2, p. 12). Bolar faces a lawsuit filed by Norwich Eaton over a generic version of Macrodantin, and a Securities & Exchange Commission investigation continues. Bolar still has a 17% stake in Marsam Pharmaceuticals and a 50% share of Somerset Pharmaceuticals, marketer of Eldepryl, which needed Bolar $ 14.5 mil. last year. Bolar shareholders will meet Nov. 1 to vote on anti-takeover provisions.
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