Melnyk to pay penalty of $565,000: report
Deal bans former Biovail CEO from directorships for five years
The Globe and Mail reported Thursday Ottawa Senators owner Eugene Melnyk and the Ontario Securities Commission have reached a settlement in his appeal of its ruling that found he acted contrary to the public interest in 2003 while he was CEO of Biovail Corp.
Melnyk has agreed to pay $565,000 to conclude his legal issues with the commission.
The penalty would go towards the cost of the OSC investigation into his conduct.
The deal also banned Melnyk from serving as a director or officer of a public company in Ontario for five years.
It also provided that he be reprimanded and agree to drop his appeal of the OSC's decision in his case.
Melnyk had asked the Ontario divisional court to set aside the ruling, which focused on events in the months before and after Biovail's announcement that it would miss its 2003 third-quarter earnings target.
Melnyk was cleared in October of allegations that he broke Ontario securities laws.
OSC made less serious finding
An OSC tribunal, however, ruled that his conduct while at the helm of the drug company was "contrary to the public interest" — a less serious finding.
Melnyk was Biovail's chairman and chief executive in 2003 when a truck carrying a load of its anti-depressant, Wellbutrin XL, was involved in an accident near Chicago. The shipment was delayed.
At the time, Biovail executives said the crash was partly to blame for a significant shortfall in revenue and profit — a disclosure that the commission contended was "materially misleading or untrue."
Melnyk, who was CEO from 2001 to October 2004 and chairman until mid-2007, took part with other company executives in news releases, an analyst conference call and investor meetings in which the truck accident was linked to the failure to meet previous earnings estimates by the firm.
The OSC launched an investigation into Melnyk's and the company's comments about that earnings warning, and in 2008 charged Melnyk with "authorizing, permitting or acquiescing" in Biovail's misstatements.
In a 2009 hearing, the commission alleged that the crash had been used to divert attention from other woes with Wellbutrin, which included production snags.