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Perrigo fails to dismiss class action over timely disclosure of Revenue’s €1.6bn tax demand

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One of Perrigo's US facilities, in Allegan, Michigan

One of Perrigo's US facilities, in Allegan, Michigan

One of Perrigo's US facilities, in Allegan, Michigan

A US judge has rejected pharmaceutical company Perrigo’s attempt to dismiss a shareholder class action that claims it didn’t disclose a €1.6bn tax liability from Revenue in a timely manner.

Instead, the judge granted a summary judgment to the shareholders on the issues of falsity and materiality.

In an opinion and order from the US District Court for the Southern District of New York, US District Judge Denise Cote wrote that a jury trial should decide if the defendants, including Perrigo, its CEO Murray Kessler and former CFO Ronald Winowiecki, had the required level of intent.

The original complaint in this action was filed by the City of Boca Raton General Employees’ Pension Plan and Palm Bay Police and Firefighters’ Pension Fund.

The Sunday Independent reported last year that the pension funds had won class action certification in the case.

The funds claimed Perrigo failed to share the disputed €1.6bn tax liability, which Revenue included in a letter the firm received in October 2018, with its investors in a timely manner. 

They alleged Perrigo failed to share the tax liability in a report in November 2018 sent to the US Securities and Exchange Commission (SEC). In the November filing, Perrigo said it disagreed with Revenue’s findings but did not specify how much it might owe.

The shareholder groups alleged Perrigo didn’t reveal the tax liability until an SEC filing in December 2018, leading to Perrigo’s share price falling by 30pc in a day.

Judge Cote’s order said the plaintiffs were “correct” to contend that Perrigo’s exclusion of the tax liability was “presumptively misleading”. She said Perrigo had a duty to disclose the loss contingency if the chance of occurrence was “more than remote but less than likely”.

Judge Cote rejected Perrigo’s argument that the €1.6bn in the audit finding letter from Revenue was not material information. Perrigo had claimed it was not a “foregone conclusion” that Revenue would issue any assessment, and the amount of any assessment was unknown.

Cote wrote this argument was not about whether an investor would find the figure material, but to Perrigo’s “duty to disclose”.

Perrigo said it does not comment on pending litigation.

The dispute centres on Revenue’s decision, following a 2016 audit, to characterise the sale of Elan as a capital transaction, eligible to be taxed at a rate of 33pc. Revenue subsequently sent Perrigo a €1.64bn tax assessment.

Perrigo maintains the cash received was declared as trading income, which is taxable at 12.5pc. The Irish Times reported Revenue had accepted the contested sum is now less than €1bn.

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