by Gay MennutiBYU’s $1 Billion Lawsuit Accuses Pfizer Of Fraud
By Lois M. Collins and Geoffrey Fattah, Deseret Morning News Published: October 19, 2006
Brigham Young University and one of its professors are suing pharmaceutical giant Pfizer, claiming BYU was defrauded of profits of at least $1 billion and credit for work that led to the blockbuster drug Celebrex.
The lawsuit, filed Wednesday in U.S. District Court in Salt Lake City, weaves a tale of a trusting university that didn’t know much about patents in biomedical breakthroughs and that was allegedly deceived by an experienced drug company.
The medication, in the non-steroidal anti-inflammatory drugs (NSAID) class, is one of the so-called “super-aspirins.” Celebrex and its second-generation drugs have had sales of more than $20 billion. The super-aspirin blocks the COX-2 enzyme, reducing pain and inflammation without triggering the sometimes-deadly gastrointestinal effects of some other NSAIDs, including aspirin. COX is scientific shorthand for the enzyme cyclooxygenase.
The lawsuit asks for a jury trial in its claim that Pfizer and its predecessor companies, including Monsanto, unjustly took credit for and profited from the work of Daniel L. Simmons, a professor of biochemistry at BYU. The complaint alleges both fraud and misappropriation of trade secrets and says BYU and Pfizer’s predecessor company Monsanto had a contract to develop such drugs together.
The pharmaceutical company instead terminated the contract “under fraudulent pretenses,” hid information that BYU was entitled to about patents and profited handsomely while shutting the university out, the lawsuit says.
The lawsuit estimates the university’s lost potential revenue is in excess of $1 billion but does not specify a dollar amount for damages. Instead, the complaint asks that those be determined at trial.
The complaint also asks for a directive to the U.S. Patent and Trademark Office to issue a certificate of correction to various patents saying Simmons was erroneously omitted as an inventor, punitive damages and costs associated with the litigation.
Simmons said in a statement that he looked forward to receiving proper credit for his work. “I appreciate the support of the university, and I’m grateful that the real story behind this research will come out,” he said.
A Pfizer spokesman denied the accusations.
“Dr. Simmons played no role in the discovery of Celebrex, and the allegations raised by BYU and Dr. Simmons are baseless,” said Pfizer spokesman Bryant Haskins, in a statement. “The facts simply don’t support the unfounded claims made in this lawsuit, and Pfizer will, of course, mount a vigorous defense.”
BYU spokesman Michael Smart said the university had attempted to resolve this dispute for years before filing suit.
“BYU initiated phone calls and letters about this issue more than seven years ago,” he said, and university officials also formally met four times with company executives.
The university and Pfizer agreed in January to hire a professional mediator but have been unable to resolve the issue. “Monsanto and its successors gave the university no choice,” Smart said.
BYU maintains in the lawsuit that Simmons discovered the COX-2 enzyme and signed a contract with Monsanto to develop NSAIDs that would protect the stomach while tackling pain and swelling. Instead, the lawsuit says, Monsanto advised BYU against getting patents that the company said would be unenforceable and promised to let the university know if something that could be patented came out of the work.
Patents did, in fact, result, but BYU was not told that it could have had a part in them. The lawsuit asks that dozens of existing patents be changed to reflect Simmons’ role in discovering COX-2 and crediting him as an inventor.
Instead of living up to the contract, the lawsuit alleges that Monsanto officials started taking credit for the COX-2 discovery and cites examples, including news articles where a Monsanto scientist claims he discovered COX-2.
“Dan Simmons and BYU had a written contract with Monsanto to use his recent discovery of COX-2 to collaborate in development of a new aspirin-like drug,” said Smart. “Until then, Monsanto had been heading down a different research path. Our lawsuit says they took Dr. Simmons’ findings and discoveries and went on to develop a blockbuster drug without him, which we believe violated the contract by sharing none of the credit or compensation.”
The lawsuit asks that dozens of COX-2 related patents be corrected to reflect Simmons’ role. “These patents were all based on the work of Dr. Simmons,” the lawsuit says.
In at least two Monsanto patents, the lawsuit says, “Monsanto fraudulently misrepresented that its cell-testing systems were constructed using human or murine COX-1 or COX-2 fragments” from a Michigan company. “Dr. Simmons has recently learned,” the complaint says, that the cell systems in at least one case “were made using the clones Dr. Simmons had provided Monsanto.”
The lawsuit also claims that the drug company misrepresented to the Food and Drug Administration Monsanto’s “true role” in the development of Celebrex.
At the time Monsanto and BYU entered into their agreement, Monsanto was trying to develop a steroid-like project and was testing compounds for NSAID properties only so it could eliminate them from consideration, the complaint says.
Haskins said Pfizer did acknowledge that Monsanto had a research agreement with Simmons and BYU, but when asked to what extent Simmons’ research was used in the company’s COX-2 project, Haskins said the company would not comment on pending litigation.
The lawsuit says that BYU was not aware that it had been cheated of credit and proceeds it was entitled to under the contract until information came to light in another lawsuit. In 1998, pharmaceutical company Merck asked Simmons to testify in Monsanto’s patent infringement suit against Merck, the BYU lawsuit says, and that’s when Simmons learned that Monsanto was taking sole credit for the discovery of COX-2.
In another lawsuit with the University of Rochester, the BYU complaint says, Monsanto in a brief said that “Brigham Young’s scientists were the first to identify methods of treatment using selective COX-2 inhibitors.”
When BYU tried to resolve the issues with Monsanto, the lawsuit says, the company initially denied “even knowing who Dr. Simmons was. When confronted with the signed agreement,” the complaint says, “Monsanto admitted to working with Dr. Simmons” but continued to deny working with them on a project to develop a COX-2 selective NSAID.
by Gay MennutiAlumni President Devoted To BYU, Service
By Charlene Winters, Brigham Young University Alumni Magazine Published: Fall 1998
If BYU’s Alumni Association president were to open a vein, his blood would probably run blue. That’s because Paul E. Gilbert has been associated with BYU throughout his life and says he still feels inspired and thrilled every time he comes to campus.
The Phoenix-based attorney’s affiliation began in childhood when he attended BY Elementary, BY Junior High, and BY High School. He then attended BYU as a history major and served as student body president. His father, who died while Gilbert was a child, was a BYU assistant football coach, and his second father was a BYU dean. The roots go even deeper. His mother taught English at BY High, all seven of his brothers and sisters have attended BYU, and the tradition is continuing with his own children.
“My wife Susan and I have consistently brought our children to Provo for Homecoming to create a feeling of excitement about coming to this fine school,” he says. “Two of my children have already graduated from BYU, another is attending the university, and my last child, a senior in high school, plans to attend BYU.
“That will make us four for four,” he adds. “We do believe in free agency in our home. I have told my children they could attend whatever college they wanted, but I have always added that BYU was paid for.”
Although Gilbert attended the University of California, Berkeley, for his law degree, he says that, despite receiving a very good education there and forming some close and lasting friendships, his feelings toward UC Berkeley don’t approach the depth of his commitment to BYU.
“I think my alliance to BYU is closely akin to my feelings and support for the LDS Church,” he explains. I also think BYU is such a unique institution that it engenders uncommon loyalty. We feel a real bond with our fellow graduates because of our common goal–and that again comes back to the Church. We are more united as a student body in our goals and aspirations than any other student body in the world.”
“Paul Gilbert is a natural choice for alumni board president,” says George Bowie, executive director of the Alumni Association and an assistant advancement vice president. “He has consistently demonstrated his commitment to BYU and his willingness to help the university in any way.”
When he graduated from BYU in 1968, Gilbert says he left with a feeling of profound joy for the BYU experience and says that whenever he steps on campus, it floods him with pleasant and treasured memories.
“Frankly, I’m always a bit proud to know that I am affiliated with a university that is doing great things and that just gets better and better with time,” he says.
He acknowledges that BYU has undergone major changes in the 30 years since he was a student, but he believes the things that make him love and appreciate BYU have stayed constant.
“BYU continues to be run by an inspired board of trustees with a rigorous adherence to Church standards. It remains full of clean-cut young people who believe as I do and who are part of the big picture that is changing the world. It also remains a university where real and meaningful truths are being taught across the disciplines. I just have a feeling BYU is playing and will continue to play an even more important role in the future in helping spread the influence and message of the gospel.”
Even after leaving BYU, Gilbert continued to serve the university. His deceptively simple philosophy about volunteer service–“I do what I am asked”–belies his deep commitment not only to BYU but also to causes in Arizona, where he serves on the board of the John C. Lincoln Foundation (one of the larger hospitals in Phoenix) and the National Conference of Christians and Jews.
“I believe in service,” he says. “I have been an admissions advisor since I was BYU student body president. I helped recruit students when I was a senior there. I helped with fund-raising, and I served with the alumni. I have also been a leader of BYU’s alumni chapter in Phoenix.”
Gilbert encourages participation in regional chapters as a way of remaining involved with BYU. “I think many alumni are fiercely loyal to BYU and want to do something that links them to the university,” he says. “Yet they may not know how to do it or where to go. My answer to that question is to join and participate in local chapters.”
Gilbert’s goals as BYU Alumni Association president–a position he will hold through 1999–are many. He looks to the chapters to help coordinate with BYU Management Society, BYU Law Society, Collegium Aesculapium, and other BYU groups. He wants to encourage regional scholarships to help worthy students who otherwise could not afford to attend BYU. He would like to see chapters participate in community activities that raise awareness about BYU. And he supports chapters as a major force in BYU’s capital campaign fund-raising efforts.
Additionally, he wants to see alumni assist each other in finding jobs. “We have a placement office–you can find it under the Alumni Association’s Web site on the Internet. Alumni should help each other.”
Particularly important to him during his tenure, he says, is to find ways to help alumni understand that the Alumni Association is their advocate and representative to BYU.
A strong believer in community involvement, Gilbert counts his work with the Desert Mission Food Bank for the Lincoln Foundation board one of his most fulfilling assignments outside of his work with BYU.
“This is a place where people come for food,” he explains. “It is designed to help them overcome a short-term problem.” The food bank began in a small building it quickly outgrew, and Gilbert headed a $2.5 million capital campaign to help the organization meet the demand.
“I still remember the day when a divorced mother with three children came in with tears streaming down her face, saying her husband had left and she did not know how she could take care of her family. I immediately could see the need for the food bank. We now have a large warehouse and a large distribution faculty. All of us are volunteers, including dentists who donate one day a month to work on children’s teeth. We began the dentistry component after some schools approached us and said some children could not concentrate because their teeth hurt so much.”
Another volunteer position has kept Gilbert busy for 15 years as a member of the board of directors for the National Conference of Christians and Jews. He now serves as chair of the Arizona chapter.
“That group was formed when Al Smith, a Catholic, ran for U.S. president,” Gilbert explains. “A lot of religious prejudice emerged from that election, and the conference began to fight prejudice on a religious basis. Since then the goals have expanded to where we fight prejudice of any type–be it religion, race, sex, or prejudice against the economically disadvantaged. Among our many projects is going into schools to promote religious and racial tolerance. Last year we talked to more than 10,000 students in Arizona.
“We also sponsor a summer camp for high school students called ‘Any Town.’ When they arrive at the camp, we assign them a color–red, brown, or yellow–for a week and help them feel firsthand the effects of discrimination based on skin color. We also work on religious tolerance. Toward the end of the week’s camp, we show them ways to overcome prejudice and help them understand how prejudice starts and what they can do to right it.”
The conference has even defended the LDS faith, Gilbert says. “We did a considerable amount of good work with minimizing the effects of the anti-Mormon filmThe Godmakers. We distributed a lot of information against it, and the people who produced the movie were so mad, they sued us. We won the law suit.”
When not serving BYU and his community, Gilbert works as a law partner in the firm of Beus, Gilbert and Devitt, which he helped found. Previously, he practiced law with former BYU President Rex E. Lee.
by Gay MennutiLaw Firm Reaches Settlement in Bonneville Pacific Case
By Joe Costanzo, Deseret News Published: May 3, 1996
A $30 million settlement agreement has been reached with a Chicago law firm involved in the Bonneville Pacific Corp. bankruptcy case, bringing the total recovered to date to about $115 million.
The firm of Mayer, Brown & Platt has agreed to pay the $30 million by the end of June if the settlement is approved by the U.S. District and Bankruptcy courts in Salt Lake City, said trustee Roger G. Segal.A third of the settlement will likely go to a Phoenix law firm – Beus, Gilbert & Morrill – which handled the litigation on behalf of the trustee.
Meanwhile, Segal also announced that U.S. Bankruptcy Judge John H. Allen has approved an earlier, $65 million settlement agreement with the accounting firm of Deloitte & Touche over the objections of Portland General Holdings Inc. and plaintiffs in a related class-action lawsuit.
About a dozen defendants in the bankruptcy case have reached settlements with the trustee in advance of a pre-trial conference scheduled for May 6. Several have cited the prospect of protracted and expensive litigation as their motive for settlement.
However, Segal noted that numerous defendants remain, including Portland General Corp. and some of its officers; the law firms of Perkins Coie, Seattle, and Fraser & Beatty, Toronto; Ronald C. Yanke; Calpine Corp.; Piper Jaffray; Kidder Peabody; and Westinghouse Electric Corp. The case is expected to go to trial later this year.
A once high-flying electric energy firm, Bonneville Pacific declared Chapter 11 bankruptcy in 1992 in the wake of losses approaching $500 million. Two of its former officers, Carl T. Peterson and John T. Dunlop, received prison terms in connection with the company’s collapse.
by Gay MennutiJudge Orders Firm to Obey Subpoena
By Marianne Funk, Deseret News Published: May 1, 1993
Deloitte & Touche’s bid to keep certain documents from Bonneville Pacific’s trustee is causing the accounting firm embarrassment and costing a lot of money.
A federal judge chided company officials Friday for not obeying an October subpoena ordering the firm to turn over all documents relevant to the company’s audits of Bonneville Pacific.”By way of fatherly advice, I will merely observe that those who have been served with a subpoena would find it prudent – very prudent – to obey them,” U.S. District Judge Bruce Jenkins told Deloitte & Touche attorney Richard Casey.
U.S. Bankruptcy Judge John H. Allen already slapped the accounting firm with a $10,000 fine for not obeying a court order to turn the documents over.
“I think there has been a deliberate attempt by Deloitte & Touche and Deloitte & Touche’s counsel to circumvent the orders of this court,” Allen said when he fined the firm last week.
He again ordered Deloitte & Touche to promptly turn over the documents Bonneville Pacific has subpoenaed.
In addition, Allen told Deloitte & Touche it must pay Bonneville Pacific for the cost of fighting the matter in court.
“That will be several tens of thousands of dollars,” said Vernon Hopkinson, attorney for Bonneville Pacific trustee Roger Segal.
Deloitte & Touche asked Jenkins to stay Allen’s order to produce the documents but met with little sympathy.
“Frankly, I don’t know of any good reason to enter a stay. I’m going to deny your motion,” Jenkins told Casey.
Casey told Jenkins he is afraid Segal will sue Deloitte & Touche for its role in Bonneville Pacific’s alleged fraud. Several investors have accused Bonneville Pacific principals of manipulating the company into bankruptcy.
Segal has good reason to sue, said Leo Beus, attorney for Segal. Deloitte & Touche’s sloppy audits of Bonneville Pacific allowed Bonneville Pacific to deceptively raise $63 million from investors.
He outlined two deceptive transactions by Bonneville Pacific that helped the company show false profits. Thousands of investors bought stock in the company based on those false profits, he said.
The profits were crafted by funneling money to dummy companies owned by the same people who ran Bonneville Pacific, Beus told Jenkins.
But Deloitte & Touche approved the transactions without making any attempt to find out who really owned those companies, Beus said.
The named owners of a company run by former Bonneville Pacific officers allegedly bought a project from Bonneville Pacific for a $25 million, Beus told Jenkins. “In fact, all Bonneville Pacific received from that project was $1 million.”
Bonneville Pacific’s former officers crafted the deal to hide a $5 million annual loss, instead reporting a fake profit of $5.8 million that year.
Deloitte & Touche approved the fraudulent deal without even phoning someone at the company that supposedly paid the $25 million, he said.
Another transaction allowed Bonneville Pacific to show a false annual profit of $10 million instead of the company’s actual $5.3 million loss, Beus said.
“These are the earnings transactions that Deloitte & Touche looks at very hard each year,” he told Jenkins.
Segal wants all Deloitte & Touche documents – including procedure and training manuals – relating in any way to Bonneville Pacific.
Although Deloitte & Touche has turned over some documents, all of the relevant parts have been whited out, Beus said.
Casey urged Jenkins not to order them to turn over the information because Bonneville Pacific clearly wants to sue Deloitte & Touche.
“Mr. Beus is well noted for the success he’s had in suing accounting firms,” Casey said.
by Gay MennutiA $128.1 Million Settlement Reached In Miniscribe Case
By The New York Times Published: June 4, 1992
Former executives, accountants and investment bankers involved with the Miniscribe Corporation, the defunct disk drive maker, have agreed to pay $128.1 million to settle fraud charges.
Greg Ruegsegger, the lawyer representing Miniscribe’s trustees, said Tuesday that he had reached an agreement in principle with more than 60 plaintiffs involved in the suits.
The settlement must be approved by a Federal judge in Denver and the United States bankruptcy judge overseeing Miniscribe’s liquidation.
In addition to Miniscribe management, defendants include the accounting firm Coopers & Lybrand, and the investment banking concern Hambrecht & Quist, among others.
They were accused of falsifying Miniscribe’s financial records and concealing the Longmont-based company’s sagging revenues throughout the late 1980s.
Miniscribe filed for protection from its creditors under Chapter 11 of the Federal Bankruptcy Code in January 1990. But the fraud allegations made it impossible to reorganize the company and the case was converted to a liquidation. Miniscribe’s assets were auctioned off to the Maxtor Corporation of San Jose, Calif.
“We’re hopeful we’ll get the settlement finalized and don’t expect any problems,” Mr. Ruegsegger said. “We think it’s a good settlement and a good deal for the estate.”
Plaintiffs including shareholders and creditors were seeking damages up to $1 billion. The company’s estate will pay off creditors in the bankruptcy proceedings as well as make cash settlements to shareholders.
The suit charged that former executives counted more than 6,000 contaminated disk drives as inventory and also packaged bricks as computer products and shipped them to distributors, recording sales of $4.3 million.
The settlement comes four months after a jury in Galveston, Tex. awarded $568 million to a group of investors and pension funds that put money into Miniscribe before the allegations arose. Coopers & Lybrand has agreed to pay up to $50 million to settle the Texas case; it is believed that Hambrecht & Quist will pay up to $24 million to settle the Denver case, according to a report in The Wall Street Journal. The investment firm already agreed to pay $30 million to settle the Texas case.
The paper said that to settle the Denver case, the defendants will pay a third of the settlement this year and the remainder over four years.
by Gay MennutiAccountant Hit With Judgment of $338 Million
By The Associated Press, Los Angeles Times Published: May 20, 1992
An Arizona Jury Says a Price Waterhouse Audit Led to a British Firm Making a Losing Investment in a Bank
PHOENIX — A state jury on Tuesday told Price Waterhouse to pay $338 million to a British banking firm because the accounting firm’s audit led to a losing investment in an Arizona bank.
The jury agreed with London-based Standard Chartered that Price Waterhouse bungled its audit of United Bank in 1985 and 1986. The British company had alleged in a Maricopa County Superior Court lawsuit that Price Waterhouse failed to alert the firm to bad loans on the bank’s books and grossly overstated its financial condition.
New York-based Price Waterhouse is one of the nation’s largest accounting firms.
Standard Chartered bought United Bank in January, 1987, for about $335 million and sold it 16 months later to Citicorp for about $208 million–a $127-million loss.
The eight-person jury found that Price Waterhouse engaged in negligent misrepresentation and breach of fiduciary duty in working for Standard Chartered.
The jury decided to award the banking company roughly the amount it paid for United Bank.
Erica B. Baird, spokeswoman for Price Waterhouse in New York, said the firm was outraged at the verdict and will appeal directly to the judge to dismiss the award.
She said the firm has a contingency plan to limit the effect of the award.
“We have insurance, and service to clients won’t be interrupted,” she said. “We are confident we can get the judgment stayed pending the appeal.”
She said the firm was relieved that the jury didn’t find that it had violated the Arizona Civil Racketeering Act, which would have allowed the damages to be tripled to more than $1 billion.
Leo Beus, attorney for Standard Chartered, said he was pleased with the verdict despite failing to get triple damages.
“This sends a signal not to trust auditors,” Beus said. “The jury wanted very badly to decide for Price Waterhouse, but they just couldn’t. The jury was very patient.”
The trial, which began in June of last year, was the longest civil trial in the state’s history, court officials said.
Beus said it was Arizona’s biggest civil award ever. Mary Budinger, spokeswoman for Maricopa County Superior Court, said the court doesn’t keep such records.
Baird, Price Waterhouse’s spokeswoman, said that the auditing firm was being made a scapegoat for a bad business decision by Standard Chartered and that the trial was bent in favor of the plaintiffs.
“This is an 11-month trial,” she said. “In the 11 months, Price Waterhouse was given 25 days to present its case.”