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Oregon Sues Merck Over Pension Fund Losses

Posted on: Wednesday, 17 August 2005, 21:00 CDT

Aug. 17--Oregon Treasurer Randall Edwards sued a drugmaker and an insurance broker Tuesday, alleging the companies' scandals cost a state pension fund at least $25 million.

In the larger of the two cases, Edwards sued Merck & Co. Inc., maker of the drug Vioxx, and eight current and former company officials, seeking $15 million in damages.

The complaint alleges that Merck knew but failed to disclose that its painkiller caused a significant risk of heart attacks, strokes and other cardiovascular-related deaths. Merck's stock tumbled 26 percent after it withdrew the drug from the market in September 2004.

The $50 billion Oregon Public Employees Retirement Fund, through various money managers, owned 1.1 million shares of Merck at the time, state treasury department spokesman Kevin Max said.

Edwards also filed suit against Marsh & McLennan Cos. Inc. and two of its former officials, seeking $10 million. The complaint alleges that the insurance and risk-management company engaged in a deceptive bid-rigging scheme, requiring insurance companies to submit false bids and pay kickbacks to get its business.

Oregon's public employees retirement fund began investing in Marsh in March 2003 and now alleges it paid an inflated price for the stock. The state, through its money managers, owned fewer than 355,000 shares of Marsh when New York Attorney General Eliot Spitzer announced in October 2004 that he was suing the company for fraud. The announcement caused Marsh's stock price to tumble more than 25 percent in a day.

Marsh in January paid $850 million to settle Spitzer's lawsuit but claimed no liability.

Representatives of both companies weren't available late Tuesday and had declined to comment earlier in the day to Bloomberg News, saying they hadn't reviewed the lawsuits. Both suits were filed in Multnomah County Circuit Court.

The lawsuits are the latest effort by the state to recover public employees pension money in the wake of corporate wrongdoing. Oregon also sued the telecommunications company formerly known as WorldCom for $24 million in 2003. That suit, now part of a larger class action, seeks to recover the value of corporate bonds that three state investment funds purchased before WorldCom filed for bankruptcy.

"The attorney general and the treasury have been very active in corporate responsibility," said Robert Stoll, whose Portland law firm is handling the case.

Oregon's latest filings came as Merck rested its case Tuesday in Angleton, Texas, in the nation's first civil trial related to Vioxx. Texas resident Carol Ernst alleges in the case that Vioxx caused the sudden death in 2001 of her husband, Robert Ernst, a Wal-Mart produce manager and marathon runner who took the drug for eight months to ease pain in his hands.

The five-week jury trial has drawn national attention from pharmaceutical companies, lawyers, consumers and stock analysts as the first of several tests of what lies ahead for Merck.

As of June 30, Merck said, it has been named in 4,200 state and federal lawsuits involving Vioxx. At least five Vioxx-related lawsuits have been filed in U.S. District Court in Portland. Three seek $10 million in noneconomic damages, court records show.

According to a Marsh filing this month with the U.S. Securities and Exchange Commission, 21 state attorneys general and 31 state insurance departments have sought or subpoenaed information from the company. The company also faces numerous class-action lawsuits brought on behalf of shareholders and policyholders.

The Associated Press contributed to this report.

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Source: The Oregonian

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