A Swiss prosecutor is probing Dan Vasella, the former Novartis board chairman, and other members of the drugmaker's board after two criminal complaints were filed over a scrapped $78 million payout that was originally part of a non-compete deal. The public prosecutor in Basel, Switzerland, where Novartis is based, is investigating whether Novartis execs can be charged,
Bloomberg News reports.
As we noted last month, the non-compete caused a ruckus. Novartis, which has been regularly chastised for the compensation awarded the departing executive, had not publicly disclosed the six-year deal (read here). The agreement angered shareholders and figured prominently in a recent national referendum in Switzerland, which gave citizens a chance to decide whether shareholders should have more say in executive compensation (back story).
In justifying its original decision, Novartis (NVS) explained the non-compete deal was designed to “protect” the drugmaker and Vasella was required to “refrain from making his knowledge and know-how available to competitors who may take advantage of his experience with the company. Dr. Vasella knows the company’s business intimately, having built the leading R&D organization and personally recruited most of the top executives.”
But Hans-Jacob Heitz, a lawyer who filed one of the complaints charging Novartis executives with breach of trust and providing untruthful business information, tells Blooomberg that "they should have disclosed the payment in the last annual report at the latest.” He declined to say how many shareholders he represents. The other complaint was filed anonymously, according to a spokesman for the prosecutor.
In an effort to mute expected criticism, Vasella indicated the “net amount” he received would be donated to unspecified philanthropic activities. But even this gesture drew criticism, because it suggested the Novartis board was, effectively, breaching its financial duty by giving Vasella a large payment that would then be given to charity, instead of being retained in the corporate treasury for shareholders.
The probe, an “absolutely” normal procedure, may take another couple of weeks, according to the spokesman for the prosecutor. But they may have to move quickly. Reports surfaced this past weekend that Vasellas was planning to move to the US or, perhaps, had already done so. We will check on extradition treaties and update you.
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