Court Says Paralyzing Man During Drug Search Violated Rights

Police suspected that a man named Felix Booker was concealing contraband inside his body. They arrested him on a drug charge and later, against his will, a doctor paralyzed him for eight minutes to take a look.

DealBook: Icahn’s Latest Gamble at Dell: Appraisal Rights

With the vote on a proposed $24.4 billion sale of Dell Inc. just over a week away, the deal’s primary opponent is trying a new tactic.

The activist investor Carl C. Icahn urged fellow Dell shareholders on Wednesday to start preparing appraisal rights for their shares. It’s a somewhat uncommon move that could yield a higher payout than the $13.65-a-share that Michael S. Dell and the investment firm Silver Lake are offering.

That is, if the gambit is successful.

The call for investors to exercise their appraisal rights is in some ways a surprising shift for Mr. Icahn, who has pushed shareholders to reject the takeover bid. He and another big investor, Southeastern Asset Management, have called for replacing Dell’s board with their own slate of directors, who would then push the company into buying back 1.1 billion shares at $14 each.

Despite winning the support of influential proxy advisers like Institutional Shareholder Services, advisers to the buyers and to a special committee of Dell’s board are still concerned that they may lose the July 18 vote on the deal. While Mr. Icahn may have lost some negotiating leverage with the I.S.S. report, those people believe that the activist may still succeed in stirring up enough opposition with the promise of his buyback proposal.

Wednesday’s announcement appears to signal that Mr. Icahn may be backing away from that plan.

Essentially, shareholders would need to vote against the leveraged buyout and then ask Delaware’s court of chancery to “appraise” the true value of their shares. (The New York Times’s Gretchen Morgenson previously wrote about appraisal rights in the Dell matter, and how some shareholders have been preparing to use them.)

Mr. Icahn cleverly points out that there is a 60-day period in which shareholders can demand appraisal rights, and then withdraw the request and accept the $13.65-a-share offer. “To add a new twist to an old saying, ‘you can have your cake and eat it too,’” he said in a statement.

Mr. Icahn is still urging shareholders to vote against the deal. But he is also betting that even if they win, Mr. Dell and Silver Lake will move to settle with dissident shareholders, paying them off to avoid years of potentially contentious court battles. In short, he’s looking for a price bump.

He notes that the buyers are on the hook for a $750 million breakup fee if they can’t close the deal under certain conditions, and questions whether the duo’s lenders will seek to back away if shareholders seek appraisal rights en masse.

There is obviously an element of chance here, since the Delaware court may award just the $13.65 a share, or even less. Mr. Icahn clearly states in his news release that “those who seek appraisal may get lucky.”

And if Mr. Dell’s bid fails, appraisal rights don’t come into play at all.

But for an investor who has thrown nearly every possible hurdle he can to halt the deal — or at least to force a higher payout — appraisal rights may pay off after all.

Questcor Pays $135 Million to Acquire Rights to a Competitor’s Drug

The company, Questcor Pharmaceuticals, has acquired the rights to Synacthen, a drug from Novartis, that is sold in Europe but not in the United States. Synacthen is similar to Questcor’s drug, which is called H.P. Acthar Gel and used to treat various immune-related ailments.

Questcor’s agreement to pay Novartis at least $135 million trumped a bid from a start-up company called Retrophin that had hoped to sell Synacthen in the United States for a few hundred dollars a vial, sharply undercutting Acthar’s price, according to people briefed on Retrophin’s negotiations.

Questcor’s stock shot up 15 percent on Tuesday, the day its deal to acquire Synacthen was announced. “We believe the acquisition removes a key overhang as a potential competitor to Acthar is removed,” Biren Amin, an analyst at Jefferies & Company, wrote in a note.

One antitrust lawyer, not involved in the negotiations, predicted the deal would receive “intense scrutiny” by federal antitrust regulators.

“The type of acquisition that raises the most concern under the antitrust law is when a dominant firm acquires a potential rival,” said the lawyer, David A. Balto, a former policy director of the Federal Trade Commission who now calls himself a public interest antitrust lawyer.

But Steve Cartt, the chief operating officer of Questcor, disagreed. He said Questcor did not have to report the transaction to antitrust regulators because Novartis, the licenser, would retain some manufacturing rights to Synacthen.

The Federal Trade Commission is now proposing new rules to end such exemptions from notification.

A spokesman said the trade commission did not comment on whether it was reviewing particular transactions but said it could even when that was not required.

Questcor, based in Anaheim, Calif., has achieved huge success with Acthar, a hormone purified from pig pituitary glands that was selling for only about $40 a vial when the company acquired the drug in 2001.

Questcor began increasing the price. In 2007, it was raised to about $23,000 a vial from $1,650, provoking howls from some doctors and patients, and has continued to raise the price since then.

The company initially said the high price was necessary because the main use of the drug was to treat a very rare condition that causes spasms in babies. But the company has aggressively marketed the drug for more common immune-related disorders like multiple sclerosis and nephrotic syndrome. Sales reached $509 million in 2012, and the price of the company’s stock has soared since 2007.

But insurers are now making sure that Acthar is used only when far cheaper steroids cannot be. The federal government is investigating Questcor’s marketing practices. And many short-sellers have been betting Questcor’s stock will fall.

The most obvious threat to Questcor’s business was the possibility of someone bringing Synacthen to the United States. Synacthen is a synthetic fragment of the hormone in Acthar.

Questcor eliminated that competitor by licensing the exclusive rights to the drug in the United States and various other countries, excluding 13 in Europe, according to a company regulatory filing.

Its initial payment of $60 million to Novartis greatly exceeded the $16 million Retrophin was offering, according to a summary of the tentative deal terms that Retrophin was circulating to investors in an effort to raise money to buy Synacthen. Retrophin, however, was offering Novartis a 20 percent royalty on sales, which is likely to be far higher than what Questcor agreed to pay.

Retrophin, which went public through a reverse merger with a shell company, is based in New York and is run by Martin Shkreli, a former biotechnology hedge fund manager. He declined to comment for this article.

It is not clear if there were other bidders. Novartis declined to comment.

Novartis can revoke the rights if Questcor does not meet deadlines in terms of testing Synacthen in clinical trials and seeking approval to market it in the United States, according to a regulatory filing by Questcor. The deadlines are not being made public.

Mr. Cartt of Questcor said the company would spend millions of dollars testing Synacthen to see if it could help American patients. “That is the essence of discovery and competition, not their elimination,” he said in an e-mail.

In the past Questcor executives have disparaged Synacthen.

“We believe it is unlikely to be a competitor to Acthar,” David Young, Questcor’s chief scientific officer, said in a call with analysts last July. He said it was not a protein produced by the body like Acthar was and added, “Synacthen contains benzyl alcohol, which is toxic to children and can potentially cause gasping syndrome, which can be fatal.”

But in a news release this week, Dr. Young said that Questcor intended to test the drug “not only in conditions different than Acthar but also in conditions where Synacthen would potentially provide a clinical benefit over Acthar.”

DealBook: Judge Approves Sale of Rights to Hostess Brands, Including Twinkies

Scott Olson/Getty Images

A federal bankruptcy judge on Tuesday approved the sales of several major Hostess Brands product lines, including Twinkies, fetching about $800 million for the various pieces of the bankrupt baking company and clearing the way for it to be eventually wound down.

Chief among the deals cleared was the $410 million sale of Hostess’s snack cake brands, including Twinkies and Ho Hos, to Apollo Global Management and Metropoulos & Company. That transaction could lead to the return of the cream-filled treats to store shelves as soon as this summer.

Also approved were the sales of most of Hostess’s bread brands, including Wonder Bread, to Flowers Foods for about $360 million. Grupo Bimbo of Mexico won control of the Beefsteak bread line for $31.9 million after beating Flowers in an auction.

No rival bidders emerged for the snack cakes or the other bread products.

Judge Robert D. Drain of the Federal Bankruptcy Court for the Southern District of New York gave swift approval of the sales, before moving onto more prosaic matters like the review of fee payments to Hostess advisers.

Hostess is also set to sell its Drakes line of snack cakes to McKee Foods, which bid $27.5 million.

Civil Rights Advocate's Disadvantaged Childhood Spurs Her Into Action

Kristen Clarke
NYLJ/Rick Kopstein

Kristen Clarke parlayed a childhood in crime-ridden East Brooklyn into a career as a civil rights lawyer and commentator on issues of race, law and democracy. As chief of the New York attorney general's Civil Rights Bureau, a position she assumed a year ago, Clarke promotes civil rights enforcement with an arsenal of New York's robust anti-discrimination laws.

Previously, Clarke was an attorney with the civil rights division of the U.S. Department of Justice and co-director of the Political Participation Group at the NAACP Legal Defense and Education Fund. She was part of the NAACP litigation team that successfully defended the Voting Rights Act in Northwest Austin Municipal Utility District No. One v. Holder, 557 U.S. 193 (2009). Another voting rights case she argued at the trial level, Shelby County, Alabama v. Holder, is headed to the U.S. Supreme Court.

A graduate of Harvard University and Columbia Law School, the 38-year-old Clarke was honored in 2011 by the National Bar Association as one of the "Nation's Best Advocates: 40 Lawyers Under 40." She has also written extensively on civil rights issues. Her recent books include Barack Obama and African American Empowerment: The Rise of Black America's New Leadership and Seeking Higher Ground: The Hurricane Katrina Crisis, Race and Public Policy Reader, both edited with the late Manning Marable, a leading black history scholar and Pulitzer Prize winner.

Her salary at the attorney general's office is $140,000.

Q: You have spent virtually your entire career advocating for civil rights. What drove you to this area of the law?

A: My experience growing up in the East New York section of Brooklyn played a large role in my decision to pursue a career in civil rights. This is a section of Brooklyn that is racially isolated and one with some of the highest poverty, crime and unemployment rates in the city. Although I have had the benefit of attending exceptional schools, I know that there are far too many who have not had access to equal educational opportunities.

I have profound respect for the work of civil rights lawyers and advocates such as Thurgood Marshall and Charles Hamilton Houston and Constance Baker Motley. Through seminal cases such as Brown v. Board of Education, they used the law as a vehicle to promote integration and as a tool to close some of the stark racial gaps that we face. I chose this path recognizing that their work is not yet done and that the progress we have achieved remains fragile.

Q: Have you personally experienced discrimination?

A: I grew up in a community called Starrett City, one of the largest housing developments in the country. Starrett City was the subject of litigation under the Fair Housing Act. For years, the complex maintained a system of racial quotas -- white prospective tenants could walk in and easily rent an apartment while black and Latino prospective tenants often faced a wait list. Starrett City defended its quota system by arguing that its purpose was to maintain a certain racial balance in the apartments, but a group of minority litigants defeated the policy by bringing a successful claim under the Fair Housing Act.

My experience in Starrett City reminds me that tackling racial segregation and isolation are incredibly complex challenges with no easy solutions but precisely the kind of problems that we need to tackle head on.

Q: How has the definition of discrimination changed? Which are the groups most at risk today?

A: Discrimination has definitely become more sophisticated in form though its impact remains the same. The challenge today is figuring out how to ensure that civil rights enforcement remains tailored to dealing with the new barriers and challenges that we face today.

For example, our state and our country are continuing to grapple with the effects of the mortgage foreclosure crisis, the overall economic downturn and high rates of unemployment. We are now seeing many employers using credit history reports as tools to evaluate job candidates. We are seeing other employers who refuse to hire job candidates who are currently unemployed. These kinds of hiring practices may be ones that have a greater impact on African-Americans, Latinos, women, the elderly and other minority groups.

The challenge is making sure that we remain focused on combating discrimination in whatever shape it rears its ugly head.

Marriage equality in New York certainly stands as a landmark achievement and we must work to ensure that same-sex couples are treated equally and fairly. We have a number of veterans and military personnel who are increasingly the targets of predatory schemes. New immigrants to our state are far too often subject to fraud and reluctant to seek the assistance of law enforcement.

Q: What does the Attorney General's Civil Rights Bureau do?

A: The Civil Rights Bureau is an engine of aggressive civil rights enforcement. The attorneys within the bureau are among the brightest and most dedicated advocates that I have had the chance to work with.

We review the complaints that come to us with a fine-tooth comb and we meet and hear from advocates about the problems that they are facing. We are proactive in our approach and frequently launch new initiatives to tackle stubborn areas of discrimination. We work to fight employment and housing discrimination, combat immigration fraud and predatory practices aimed at minority groups, and work to promote equal educational opportunity and full access to the ballot box. Sometimes achieving real results means taking a stance that is unpopular and we have an attorney general who is not afraid to do that.

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Fla. Law School Launches Human Rights Collaboration in Colombia

By Karen Sloan All Articles 

The National Law Journal

November 30, 2012

The human rights programs at two Colombian law schools will get a boost from the U.S. government and the University of Florida Levin College of Law.

The U.S. Agency for International Development has allocated $757,200 for the law school to help establish the Colombian Caribbean Human Rights Center, which will promote research and community service.

The center will train students at the Universidad del Magdalena and Universidad del Norte in international human rights standards, human rights advocacy, and how to assist vulnerable populations including minorities and displaced people. The law schools are located in Santa Marta and Barranquilla, Colombia, respectively.

"Respect for the rights of individuals, especially vulnerable populations, is vital to the development of the democracy and economy of a nation," said Jon Mills, who heads the law school's Center for Governmental Responsibility and will help direct the new project. "We are honored to have this opportunity to work with two distinguished Colombian universities on such an important priority for the U.S. government."

Administrators noted that the recent end of a civil war in the South American country and free trade agreements have made the advancement of human rights there of greater interest to the United States. Colombia is a close trading partner with Florida.

The Levin College of Law will work alongside the UF College of Education and Center for Latin American Studies on the project, which is slated to last three years. Plans call for close collaboration between UF and the partner law schools in mounting workshops in Colombia; creating opportunities for Colombian law faculty and students to study in Florida; and financing research partnerships.

"The higher education sector is rapidly developing in Latin America and the Caribbean," education professor Pilar Mendoza said. "The University of Florida is uniquely positioned to take advantage of these developments and engage in these types of collaborations."

In Midwest, Labor Presses for a Vote to Lock In Union Rights

Michigan’s unions are asking voters to approve a referendum on the ballot this November, known as Proposal 2, that would lock a series of labor protections into the state Constitution, including the right of public sector unions to bargain collectively and a prohibition against the legislature’s enacting a “right to work” law.

The ballot campaign represents an attempt by unions and their Democratic allies to slow or stop the wave of Republican-backed measures adopted in Wisconsin, Indiana, Ohio, Tennessee and other states in the last two years to curb collective bargaining and weaken unions, especially those representing government workers.

“Besides the presidential race, Proposal 2 is probably going to be the most significant thing on the ballot nationally,” said F. Vincent Vernuccio, director of labor policy at the Mackinac Center, a conservative research center based in Midland, Mich. “Michigan is surrounded by Wisconsin, Indiana, Illinois and Ohio — states that have taken wildly different views of private and public sector unions. The nation is on a teeter right now on union matters, and Michigan will give momentum to one side or the other depending on how this plays out.”

Business groups and Michigan’s Republican governor, Rick Snyder, say that if the referendum to enshrine labor rights in the Constitution is approved, it will cast a major cloud over the state’s business climate — broadcasting to the world that organized labor, whenever it deems fit, can use its muscle to go to the voters to trump the legislature and governor.

“Michigan’s union bosses are field-testing a new weapon,” said Rich Studley, president of the Michigan Chamber of Commerce. “If this weapon is successful in banning legislation, we’ll see it deployed in the 21 other states that allow initiatives and referendums.”

Further flexing their muscles, unions are sponsoring two other proposals on the Michigan ballot. One would repeal a law that allows emergency managers appointed to oversee financially distressed communities to void union contracts. Another would amend the Constitution to guarantee home health aides the right to unionize.

Both sides are flooding the airwaves with ads about Proposal 2, with each side accusing the other of using misleading scare tactics.

In one union-backed commercial, for example, a firefighter is wearing an elaborate fireproof apparatus over his head. “This air pack I’m wearing gives me 30 minutes to look inside your burning house and find you,” he says. “Having the most modern dependable equipment when the clock is ticking, that counts. If it comes from collective bargaining, the politicians can’t cut it without our say-so.”

Opponents are broadcasting an ad that begins with a child leaving for school. “When we send them off in the morning, we should be certain they’re safe in school,” the voice-over says. “If Proposal 2 passes, it would eliminate safety rules for school bus drivers. Worse, Proposal 2 could prohibit schools from removing employees with criminal records. That’s dangerous for kids and terrifying for parents.”

Although most of the campaign’s financial disclosures are not due until after the election, political experts estimate that more than $30 million will be spent in the fight, with national business and labor groups contributing substantial financing.

At the moment, the proposal’s chances of passing are difficult to predict. Proponents had a significant lead at first, but that has eroded as business-backed groups have escalated their attacks. A Detroit News poll released Oct. 12 found that 43.2 percent of the 600 people surveyed supported the proposal, and 41.8 percent opposed it. The difference was within the poll’s margin of error.

Union leaders say Proposal 2 has a simple aim: to protect collective bargaining against further assault.