Revealing Lawsuits Delay RU-486 Deployment

Revealing lawsuits delay RU-486 deployment

by James A. Miller

A tangled web of lawsuits regarding the manufacture and distribution of the "French "abortion pill," RU-486-recently filed in courts in Los Angeles County and New York City-may delay, at least temporarily, the abortifacient's American debut.

The controversy centers about San Diego businessman Joseph D. Pike, who was granted the manufacturing and distribution rights to RU-486 by the Population Council, which holds the U.S. patent rights to the drug.

KCC Delaware,[1] a wholly owned subsidiary of the Giant Group, Limited, a prospective investor in various Pike partnerships and companies set up to bring RU-486 to market filed suit against Pike for "fraud, breach of fiduciary duty, fraudulent concealment, breach of contract, [and] unfair business practices." Pike in turn has countersued KCC Delaware, Giant Group, and various principals of Giant for "defamation."[2]

Additionally, Pike is being sued in New York State court by the Population Council and its subsidiary, Advances in Health Technology, an entity specially created by the Council to market RU-486, for several counts of fraud he allegedly committed in his dealings with them.[3]

The history of RU-486

RU-486, also know as mifepristone, was first synthesized in the mid-1980s by the French researcher Dr. Emile Baulieu, an advisor to Roussel Uclaf, a French subsidiary of the pharmaceutical and chemical giant Hoechst A.G. of Germany. Hoechst became notorious in World War II as the manufacturer of Zyclon-B, the gas used in the Nazi extermination camps.

Although Roussel has marketed RU-486 for several years in France, Sweden, Great Britain and China, the company and its parent Hoechst have been loath to bring the drug into the American market for fear of pro-life protests and boycotts by U.S. right-to-life groups, as well as potential consumer lawsuits in the more litigious American society.

Bill Clinton to the rescue

On 22 January 1993, in one of newly inaugurated Bill Clinton's first acts as president, he directed the Department of Health and Human Services to review ways to test, license and manufacture RU- 486.[4] Several months later, acting under "sustained political pressure from the Clinton Administration,"[5] Roussel Uclaf agreed to hand over, free of charge, the drug's patent and technology to the Rockefeller-founded Population Council, the inventor of Norplant and the Copper-T IUD.

In an extraordinary meeting convened by Food and Drug Administration (FDA) Commissioner Dr. David Kessler, and held 20 April 1993 at FDA offices in Rockville, Maryland, Roussel's president met with the Population Council's president, and hammered out the marketing agreement between the two corporations.[6]

Under the terms of the pact, Roussel Uclaf would be shielded from liability in any subsequent lawsuits that might arise. The FDA in turn made an unprecedented agreement with the Population Council intended to help conceal the Council's role in manufacturing and distributing RU-486 in the United States. The secrecy was allegedly necessary to protect RU-486 sublicensees from possible boycotts and violence.

Despite the Roussel/Population Council agreement, Roussel and Hoescht were still reluctant to allow RU-486 into the United States. Another year passed before back-door negotiations between the Clinton administration and Roussel-Uclaf finally resulted in the U.S. patent rights to the drug being formally turned over to the Council. President Clinton himself made the momentous announcement.[7]

Advances in Health Technology

After a number of U.S. drug and chemical companies refused to get involved in the RU-486 project, the Population Council in 1995 created Advances in Health Technology (AHT) to handle the manufacture and distribution of the drug. AHT was set up as a non- profit company which would actually produce nothing, but instead would contract with a manufacturer whose identity and location would be kept secret for "security reasons."

However, despite all the hype from the Population Council and other abortion proponents about the alleged danger of violence from pro-life groups, one key official of the Council candidly admitted that the real reason American drug companies refused to manufacture RU-486 was "not because of the fear of protests by outsiders but because of the opposition from their own employees.[8]

In any event, AHT was incorporated in New York on 12 July 1995 and set up office in an undisclosed "Dupont Circle area" location in Washington, D.C. AHT's incorporating officer and "founder" is Forrest S. Greenslade, a former employee of the Council who was instrumental in commercializing the Council's Copper-T IUD. Mr. Greenslade is currently also the president of IPAS (International Projects Assistance Services of Carriboro, North Carolina), the infamous manufacturer and distributor of manual vacuum suction abortion machines.[9]

AHT's president and chief executive officer, Dr. Susan Allen, is a physician who has "worked previously for the U.S. Agency for International Development in a contraceptive-research program, and for Planned Parenthood of the Rocky Mountains."[10]

Enter Joe Pike

In December 1995, AHT entered into "exclusive sublicense agreements for the manufacture and distribution of mifepristone in the United States and other parts of the world," with Joseph D. Pike and two of his companies, Danco and NeoGen Pharmaceuticals.[11] Danco was to handle the use of RU-486 "as an abortifacient," while NeoGen would manage RU-486 usage "for all other medical indications."[12]

Various news accounts have identified one Leslie Sebastian, a former San Diego Planned Parenthood administrative assistant, as a spokeswoman for NeoGen and Danco, as well as vice president of Danco.[13] Pike controls Danco through another Pike operation, N.D. Management, Inc, the "sole general partner of NeoGen Holdings, which in turn is the "sole shareholder of Danco."[14]

Another Pike creation, NeoGen Investors, "a California limited partnership ... formed to finance the operations of the [Pike] entities that received the mifepristone sublicenses,"[15] is the "sole shareholder of NeoGen Pharmaceuticals."[16]

As Sandra Waldman, a spokeswoman for the Population Council, explained it, "Advances in Health Technology is our licensee and Pike's operation is the sublicensee."[17]

Pike and the Population Council were old friends; the Council had been "dealing with Mr. Pike for more than a decade,"[18] with Pike being an early backer of the Council's Copper-T IUD.[19]

Pike: A disbarred felon

Recently, however, some disturbing facts about Joe Pike's professional life came to the attention of both the Population Council and Giant Group Limited, which was contracting with Pike for a piece of the RU-486 action. Pike was discovered to be a convicted criminal, having pleaded guilty on 30 May 1996 to a charge of forgery in connection with a 1985 North Carolina real estate deal.

For this crime, Pike received a suspended two-year prison sentence and 18 months probation. In addition, Pike, a lawyer, was disbarred from the North Carolina State Bar in 1993 as a result of his "actively defrauding two clients in [the] 1985 real estate transaction ... for his own financial gain."[20]

The Population Council was especially put out at the fact that "at the very time Pike was negotiating with the Council and [AHT] for the granting of the mifepristone sublicenses, [his] criminal defense attorney was engaged in plea-bargaining in connection with a charge of forgery."[21] Despite its long-time prior association with Pike, the Council maintained that it had been unaware of his criminal activities until July 1996.

In their respective lawsuits, the Council and KCC Delaware assert that they would never have entered into negotiations with Pike if they had known of his criminal conduct, and both agree that Pike should not be the managing partner or otherwise control the RU-486 project.

Indeed, KCC Delaware stated that "the right to market mifepristone in the United States and elsewhere is so lucrative that, if placed in the wrong hands, it has the potential to be the biggest fraud scam on investors in the past decade." KCC estimated that mifepristone has a "potential United States market exceeding $100 million annually."[22]

Where's the money?

According to the Population Council's suit, one of the tasks Pike undertook was "to raise money from investors to finance the mifepristone project." Pike was to accomplish this by the sale of private placement "limited partnerships units in NeoGen Investors ... with the goal of raising $27,500,000." As of mid-1996, Pike represented to the Council and AHT that "approximately $14 million has been raised" through such sales.

The Council asserts that "Pike has admitted that the proceeds of the NeoGen Investors offering that remain in cash-purportedly $1.6 million as of 31 July 1996-were being , but in the name of NeoGen Industries ... an entity previously unknown to the Council and Advances" (emphasis added).[23] It is not clear as to what has happened to the remaining $12.4 million that Pike has allegedly raised.

The Council claims that "Pike has failed to explain how NeoGen Industries fits into the organizational structure ... that he had sat set up for the project, or why the money is being held in the name of that entity." The Council states that it has subsequently learned that "NeoGen Industries is a California corporation that Pike incorporated under the name of NeoGen in April 1995, and whose name he has changed since then (emphasis in original). The Council said it has "no information that would explain why Pike changed the name of this entity four times within eighteen months."[24]

One of the most startling charges against Pike is that he has sold or has "attempted to sell equity interest in ...NeoGen [Investors] which aggregate over 100%"![25]

Complicating matters is the fact that at least one of Pike's network of companies, NeoGen Holdings, which ultimately controls the two entities Pike set up to manufacture and market RU-486- Danco Laboratories and NeoGen Pharmaceuticals-is a "Cayman Islands limited partnership."[26] The Cayman Islands have long been a haven for tax cheats and corporate swindlers who are able to shelter their ill-gotten gains there, protected by the Islands' financial secrecy laws.

What to do about Pike?

The Population Council fears that "Pike's fraud now imperils the mifepristone project [in-as-much as] the truth about Pike must be disclosed to all parties who have invested in NeoGen Investors, and who may opt to rescind their participation if Pike remains in an active or controlling role."[27]

"Unless Pike is expeditiously removed," the Council argues, "it will be much more difficult, and perhaps impossible, to raise the additional funds that are still needed to fund the project, and another weapon with which to attack the project will be furnished to its ideological opponents."

According to the Council, "Pike's past criminal conduct, and his fraudulent concealment of it, make it impossible for the Council and [AHT] to trust him with control of [the RU-486] project, which involves the management of tens of millions of dollars." Moreover, the Council and AHT asserted that they "simply cannot be associated with an individual who has any record of engaging in fraud or other conduct evidencing moral turpitude."[28]

Accordingly, the Council is seeking "a mandatory injunction ordering Pike to transfer ... all stock of N.D. Management ... to a [court-appointed] receiver ... who shall ... sell such stock to a third party or parties acceptable to the Council and [AHT]] .. "[29] The fact that the Council sought injunctive relief rather than suing on the contract(s) it has with Pike, may be a tell-tale admission that, at least in regard to the Council, Pike had not breached the terms of the contract.

On the other hand, KCC Delaware is suing Pike for his alleged breach of the contract which KCC says it had with him and his various entities. KCC is seeking a $10 million judgment against Pike and his various companies, and/ or Advances in Health Technology and the Population Council.

Sugarman: Not so sweet

But Pike was not going down quietly, at least in regard to the KCC action. The disbarred attorney and convicted forger countersued KCC Delaware and its parent, the Giant Group, Limited for their alleged defamation of his character!

Pike maintains that there never was a contract with KCC because, after he discovered various unsavory facts about Burton R. Sugarman, who controlled KCC Delaware through his control of KCC's parent, the Giant Group Limited, Pike's licensors (presumably AHT and the Population Council) "would not consent to any dealings with Sugarman or any companies that he is involved with."[30]

Among the troubles and controversy surrounding Mr. Sugarman, which Pike discovered in his "due diligence" investigation of his would- be partner in the RU-486 venture, were (1) "several SEC [Securities and Exchange Commission] investigations [alleging] failures to disclose or putting out false and misleading information," (2) a verdict against [Sugarman] in 1991 for civil fraud," (3) "a payment to the SEC in the amount of $619,000 to settle charges of failure to disclose information during a takeover of Rally's [Hamburgers]," and (4) "a lawsuit filed by shareholders for putting out false and misleading information."[31]

Sugarman, who has been described by as a "small-scale corporate raider,[32] and by the suing shareholders of one of his companies as a "recidivist violator of the federal securities law,"[33] has long had an unsavory reputation for stock manipulations, looting public companies, and taking advantage of his business partners and stockholders.

According to , Sugarman's problems with other investors date back nearly 30 years, at least to 1967, when, in one of his first deals, he allegedly defrauded the famous golfer Arnold Palmer and four others in the purchase of a site for a golf course.

According to Palmer and his fellow investors, Sugarman told them that the "seller was a bit naive and that he, Mr. Sugarman, could get the land cheap."[34] After the property was bought, rising construction costs and declining land values effectively wiped out the investors' interests and no golf course was ever built.

"Full of apology, Mr. Sugarman advised his friends to stop making mortgage payments and walk away, abandoning their interest to the beneficiary of the trust deed." But one of the partners noticed something odd: "Sugarman himself held the deed of trust," and, it was subsequently discovered, Sugarman "had been the 'naive' seller of the land"!

A 1977 lawsuit filed by Palmer and the other investors had a happy Hollywood ending -Sugarman gave them back their money in an out- of-court settlement.

Among the long series of other sharp dealings by Sugarman was his 1986 purchase of Barris Industries, the producer of such "low- brow" television shows as and . According to Budd Granoff, Barris' president for 22 years, Sugarman received $500,000 cash from Barris, plus stock options that Sugarman eventually sold for $1.8 million, as compensation for movies that Sugarman was developing but which were never made and finally written off by Barris as worthless.[35]

According to Granoff,

Sugarman "sold [to Barris] properties that I felt were worthless. He enriched himself at stockholder expense." Granoff added, "I wanted to run as soon as he got control. I don't like the way the guy does business."

Other complaints against Sugarman include a dispute over a hazardous waste contract with Delaware Container wherein Sugarman agreed to share certain fees with Delaware, but never did so. A federal court decision resulted in Sugarman's Giant Group paying nearly $2 million to Delaware in 1989.[36]

Sugarman was also involved in a number of unsuccessful corporate raids which turned out to be quite profitable when the target companies paid him "greenmail"-a Wall Street term for the cash given would-be takeover artists to persuade them to sell their stock and go away-and which often triggered SEC investigations into possible security law violations by Sugarman in pursuit of his hostile bids.

Conclusion

It is ironic that the veil of secrecy erected by the Population Council, Joseph Pike, and their respective corporate creations has been pierced by the very parties that sought anonymity, in what is essentially a falling-out among thieves.

Thanks to the lawsuits and the accompanying charges and countercharges, the public has been afforded a good look at the type of characters who would flock to such a venture as the promotion of an "abortion pill." Not surprisingly, their backgrounds and personal character are rather unsavory; after all, if one is willing to do abortions, what activity is so low that one would not stoop to doing it also?

James A. Miller is a writer/researcher for HLI. The author wishes to acknowledge the assistance of Randall O'Bannon, director of research for the National Right to Life Committee, in obtaining copies of the court papers filed in the three RU-486 lawsuits, and d the staff d in providing background information about some of the principals involved in those suits.

ENDNOTES

1 Lawsuit, Superior Court of the State of California for the County of Los Angeles, Case Number SCO44748, filed 31 October 1996.

2 Lawsuit, Superior Court of the State of California in and for the County of San Diego, Case Number 00705429, filed 13 November 1996.

3 Lawsuit, Supreme Court of the State of New York, County of New York, The Population Council, et al, v. Joseph D. Pike, Number 96- 605505, filed 4 November 1996.

4 "Panel of Advisors to F.D.A Urges Agency to Approve Abortion Inducing Drug," , 20 July 1996, 9. s Katharine Seelye, "Enter RU-486, Exit Hype," , 22 May 1994, Section 4, 16.

6 warren Leary, "Maker of Abortion Pill Reaches Licensing Pact with U.S. Group," , 21 April 1993, A18. The principals at the FDA meeting were FDA Commissioner Dr. David Kessler, Roussel-UcLaf president Edouard Sakiz, and Population Council president Margaret Catly-Carlson.

7 Charmaine Yoest, "RU-486-Sunny Rhetoric vs. Bloody Reality," 25 May 1994, A16.

3 "Abortion pill study being run surreptitiously," , 28 October 1994. Quote from Dr. C. Wayne Bardin, research director of the Population Council.

9 "An Instant Business Called the Abortion Pill," Business Week 15 July 1996, 33.

10 Ibid. See also Kathleen Daly, "Protest Fears Spur Effort to Keep Name of Abortion Pill's Maker Secret," . 21 September 1996, D1-2.

11 6.

12

13 Judith Martel, "Bitter Pill: San Diego at Center of RU-486 Battle," January 1997, 1.

14 4.

16 Ibid, 11.

17 Gina Kolata, "Business Dispute May Delay Introduction of Abortion Pill." , 1 November 1996, A20.

18 Ibid.

19 Tamar Lewin, "Dispute May Delay Abortion Drug in the U.S.," , 6 November 1996, A16.

20 10.

21 , 2.

22 , 2.

23 17.

24 The four name changes were as follows: (1) from NeoGen to NeoGen Pharmaceuticals in June 1995; (2) from NeoGen Pharmaceuticals to NeoGen Industries in November 1995; (3) from NeoGen Industries back to NeoGen Pharmaceuticals in February 1996: and (4) from NeoGen Pharmaceuticals beck to NeoGen Industries in March 1996.

25 , 3, 11.

26 , 4.

27 4-5.

28 , 5.

29 , 6.

30 5.

31 Ibid, 4.

32 Ralph King Jr. "Gaining en edge: How a Car Dealer's Son Made It in Hollywood While Alienating Many," , 1 October 1991, A1, 8.

33 2.

34 "Gaining an Edge, etc.," A8.

35

36

Taken from the February 1997 issue of "HLI Reports." To subscribe contact: HLI Reports, 4 Family Life, Front Royal, VA 22630, 540-635-7884, e-mail: hli@hli.org, Web address: http://www.hli.org.

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