Elan Under Fire

Ireland-After its share price collapsed in the wake of the Enron scandal and growing concern about shady accounting practices, Elan said it would "vigorously defend" itself against allegations that it violated US federal securities laws.

Wolf, Haldenstein, Adler, Freeman, and Herz, the law firm handling the class-action suit brought by shareholders angry about Elan's off-balance-sheet activities, alleges that the Irish company violated federal securities laws by "issuing materially false and misleading statements that had the effect of artificially inflating the market price of the company's securities." The suit also claims that Elan engaged in improper accounting practices that falsely inflated the company's reported revenues, inappropriately increasing its assets and reducing its reported expenses.

Other law firms in the United States-where most of the company's investors are based-have made similar complaints. The lawsuits were filed shortly after Elan was forced to suspend testing of a new treatment for Alzheimer's disease after patients in France suffered inflammation of the central nervous system. Shire and Wyeth have been touted as possible bidders for the troubled company.

According to the Wall Street Journal, the class action suit centers around two Bermuda-based fundraising vehicles, said to be owned but not controlled by Elan. The company's chairman and CEO Donal Geaney rejected what he called the WSJ's "one-sided" allegations, asserting, "Elan's accounting practices are in accordance with US GAAP [generally accepted accounting principles] and Irish GAAP and were thoroughly reviewed by the SEC [Securities and Exchange Commission]in 1999.

The company's policies regarding its strategic joint ventures and business activities are fully disclosed in its SEC filings. Elan is confident that its accounting and business practices can stand up to any scrutiny."