Cardinal Health, Inc. (NYSE:CAH)

In a shareholder derivative action on behalf of Cardinal Health, one of the largest distributors of pharmaceutical products in the country, Robbins Arroyo LLP served as lead counsel for the plaintiff and brought claims against certain officers and directors of the company arising out of Cardinal’s proposed stock-for-stock acquisition of Syncor International Corporation, a radiopharmaceutical company that, at the time, was the subject of an investigation by the Securities and Exchange Commission for violations of the Foreign Corrupt Practices Act.  Robbins Arroyo LLP attorneys sought to enjoin the Syncor acquisition if Cardinal did not renegotiate the price, which was artificially high due to Syncor’s accounting improprieties.  The action forced Cardinal to reduce the previously negotiated acquisition price for Syncor, saving the company tens of millions of dollars.

During the course of its work on the Syncor transaction, Robbins Arroyo LLP and firms in related litigation discovered that Cardinal insiders had engaged in a massive revenue inflation scheme that had materially overstated Cardinal’s operating revenue, manipulated accounting reserves, and employed a variety of other improper revenue and earnings management practices to fraudulently overstate its financial performance.  Robbins Arroyo LLP filed an amended complaint against several of Cardinal’s officers and directors, defeated multiple motions to dismiss, pursued and reviewed millions of pages of documents in discovery, and developed a strong case against the officers and directors.

After five years of litigation, Robbins Arroyo LLP attorneys negotiated and resolved the matter by obtaining $70 million for the company – one of the largest monetary recoveries ever in a shareholder derivative action.  The settlement also required Cardinal’s board of directors to implement significant corporate governance and internal accounting controls designed to improve the board’s oversight of Cardinal’s senior management and to prevent the recurrence of the accounting manipulations alleged in the action.

In re Cardinal Health Derivative Litigation, No. 02-CVG-11-639 (Ohio Ct. C.P.-Del. County Dec. 17, 2007).

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