Two former executives of a biopharmaceutical company have filed a lawsuit against members of the board of their former employer, alleging violations of SEC rules and Michigan whistleblower laws that they contend led to their firings late last month.
Former CEO Rob Chioini and former CFO Thomas Klema are asking for reinstatement, back pay and legal fees.
Chioini and Klema allege the board was informed of the whistleblower complaint the night before they were fired at a May 22 board meeting in a 5-3 vote. The lawsuit states the complaint was a contributing factor to their firing.
"Defendants would not have taken the same personnel action in the absence of plaintiffs filing the whistleblower complaint," said the June 13 lawsuit filed in the U.S. District Court in Detroit.
The five board members voting to fire the two executives—Chairman Benjamin Wolin, John Cooper, Robin Smith, Mark Ravich and Lisa Colleran—were named as defendants in the suit, along with Rockwell Medical Inc.
A Rockwell spokesman provided this statement: "We will respond to Robert Chioini's just filed federal complaint in due course. However, to be clear, Robert Chioini lost his job because of his sustained mismanagement of the company, including his blatant disregard for shareholder concerns. The evidence will show that his termination was well underway long before, and was in no way connected to his complaint or the spurious allegations within it."
Marc Newman, a lawyer with the Miller Law Firm in Rochester, is representing Chioini and Klema.
In 1995, Chioini founded Wixom-based Rockwell Medical. The biopharmaceutical company produces two FDA-approved main products, Triferic and Calcitriol. Triferic is used to replace iron and maintain hemoglobin in kidney dialysis patients suffering from anemia. The generic drug Calcitriol, active vitamin D injection, is used to treat secondary hyperparathyroidism in patients undergoing chronic renal dialysis.
But Rockwell has financially underperformed for years, according to activist shareholders who have pressed Chioini for changes in governance, strategy and operations.
Last month, Rockwell reported results for the first quarter ended March 31 that showed while sales had increased 2.4% to $14.9 million over the same period in 2017, the net loss was $6.5 million, or 13 cents per share, up from $4.7 million, or 9 cents per share in the same period in 2017.
On May 25, Rockwell's share price dropped to $5.71, down from $5.94 on May 22, and from a high of $16 in 2011. By June 15, Rockwell's stock price dropped further to $5.12.
Late last month, Oakland County Circuit Court Judge Wendy Potts barred Chioini and Klema from entering the offices of Rockwell Medical for 21 days while the parties undergo mediation to resolve disputes. Mediation was supposed to begin today.
Potts also said in her May 25 order that Chioini and Klema could not contact the company's employees, hold themselves out to the public as officers of the company, file any documents with the SEC, issue any press releases on behalf of the company or have any contact with customers or vendors.
She also ordered the Rockwell board not to make any major decisions until the issues are resolved. The lawsuit also alleges that the Rockwell board has made several decisions regarding the marketing and sales of Triferic against Potts' order.