Former pharma executives sue over firings
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.
On June 13, Potts ordered Rockwell Medical to delay by at least 30 days the planned June 21 shareholder meeting.
Over the past month, Chioini has been embroiled in several legal actions regarding the firings. On May 23, he filed an 8K report to the SEC that stated his termination was improper because it was done during a special meeting he called on another matter. On May 24, Rockwell filed a lawsuit in Oakland County Circuit Court to have Chioini and Klema barred from presenting themselves as Rockwell representatives.
In the June 13 lawsuit, Chioini and Klema argue that Rockwell board members "in order to disguise their true motives, defendants also made false claims regarding the grounds for terminating Klema's employment."
Those statements include "false claims was that a ground for his termination was his participation in the filing of the Chioini May 22 8-K." Chioini and Klema allege they had permission from two board members, Ronald Boyd and Patrick Bagley, who they describe as "non-conflicted."
Boyd and Bagley, who voted against the firing of the executives, have filed papers in Oakland County Circuit Court that the other board members fired Chioini and Klema in retaliation for the whistleblower complaint, according to the June 13 lawsuit.
The lawsuit also alleges that the five defendant board members "held a secret, unauthorized meeting" to discuss a strategy to terminate Chioini and Klema.
"Defendants' actions at the May 22 Special Board Meeting were undertaken in such a manner as could only have been executed through prior coordination," the lawsuit said.
"Former Rockwell Medical CEO, CFO sue over firings" originally appeared in Crain's Detroit Business.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.