Biovail chairman's hearing on insider trading allegations set for Sept. 21

By Angela McDaniels

Seattle, July 31 - The Ontario Securities Commission will consider whether to take action against Biovail Corp. chairman of the board Eugene Melnyk and three others during a hearing on Sept. 21, according to a notice of hearing posted on the commission's web site.

In a 31-page statement of allegations, the commission accused Melnyk of failure to file insider reports, failure to disclose his complete holdings of Biovail shares and failure to disclose changes in his holdings.

According to the statement, Melnyk established four trusts, the assets of which are held by investment companies and consist primarily of Biovail shares. The trustees are located in the Cayman Islands.

In 1996, Melnyk caused the transfer of over 4 million Biovail shares, or 19% of outstanding shares at the time, to the investment companies controlling the trusts from holdings of Biovail shares over which he exercised control or direction, the commission alleged. Trading accounts were then opened at broker and investment dealer Watt Carmichael Inc. for each of the investment companies controlling the trusts.

Discretionary trading authority over the accounts was exercised by Watt Carmichael president and chief operating officer Roger Rowan, who was a director at Biovail from 1997 to 2005 and is the registered representative for the personal trading accounts of Melnyk and his wife, according to the statement of allegation.

In a statement, Melnyk denied he had done anything wrong.

"I did not own the shares in question in the period after these trusts were established," he said.

"I have never been a trustee of these trusts, was not a beneficiary of the trusts during the period in question and did not even learn of the existence of many of these trades until months after they occurred, if at all.

"I intend to pursue the swiftest possible resolution of this matter in order to demonstrate that I took my reporting obligations seriously and that I complied with those obligations in every respect."

Biovail acknowledged the upcoming hearing in a press release on Monday and said the company, its board and its management team have "continued confidence in Mr. Melnyk's ability to lead the corporation as chairman" and that it will not comment further on the matter at this time.

During the hearing, the commission will decide whether to order Melnyk and Rowan to cease trading Biovail securities; to order the resignation of Melnyk, Rowan, Watt Carmichael chairman and chief executive officer Harry Carmichael and Watt Carmichael chief compliance officer and chief financial officer G. Michael McKenney and whether to order each to pay a penalty of up to C$1 million for each failure to comply with Ontario securities law, among other actions.

Biovail is a specialty pharmaceutical company based in Toronto engaged in the formulation, clinical testing, registration, manufacture and commercialization of pharmaceutical products using advanced drug-delivery technologies.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.