Recall Investigations

In a recently filed federal lawsuit in Trenton, New Jersey, Johnson & Johnson shareholders are alleging that the company’s directors disregarded red flags foreshadowing product recalls and government probes of manufacturing defects.  The shareholders are claiming that the company’s directors and top executives mismanaged Johnson & Johnson.  The Plaintiffs also seek to have Johnson & Johnson “improve its corporate governance and internal procedures.”  Any money damages recovered would go to the company and not to the individual shareholders.

Johnson & Johnson is the world’s largest maker of healthcare products. It recalled more than 40 types of medicines in the past year due to contamination and incorrect labeling.  U.S. lawmakers began investigating Johnson & Johnson after a recall of batches of children’s Tylenol forced the company to suspend operations at a plant in Pennsylvania. The investigation found the use of contractors to purchase defective Motrin painkiller.

The government is also investigating Johnson & Johnson into whether it illegally marketed drugs and devices for uses not approved by the FDA and whether the company paid kickbacks.  Shareholders allege that while J&J once set the gold standard for integrity and excellence, the directors’ utter disregard for their fiduciary duties, including permitting and fostering a culture of systemic, calculated and widespread legal violations has destroyed J&J’s hard-earned reputation.

The shareholders also claim that the board received “years of red flag warnings of systemic misconduct.”  The red flags came in the form of federal and state regulatory investigations, subpoenas for documents, FDA Warning Letters, news articles and the recall of products accounting for hundreds of millions of dollars in corporate losses.  Shareholders sent three letters to Johnson & Johnson last year demanding that it “investigate a variety of alleged issues and take appropriate action.” 

Source: Bloomberg

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