In re Walgreen Co. Derivative Litigation
When most people think of the Drug Enforcement Agency (DEA), images of fighting dangerous and illegal drug cartels come to mind. However, it was the agency's investigation of the nation's biggest pharmacy chain that actually led to the largest fine in DEA history.
The DEA action revealed that Walgreens' pharmacists and the senior leaders of the company had "staggering disregard" for Walgreens' obligations under the Controlled Substances Act, which regulates the manufacture, importation, possession, use, and distribution of certain substances. Since at least 2010, a majority of Walgreens' board knew of the improper sales of the prescription painkiller oxycodone but continued to allow the medication to fall into the hands of drug abusers and illegal black market dealers.
Walgreens shareholders, which included lead plaintiffs West Palm Beach Police Pension Fund and the Police Retirement System of St. Louis, had no tolerance for the company's unlawful practices. As co-lead counsel, we alleged that the board members breached their fiduciary duty by failing to take any steps to stop the illegal drug sales, despite repeated warnings from the DEA and various enforcement officials, resulting in an $80 million fine.
In September 2014, the Firm secured substantial corporate governance reforms on behalf of shareholders. We negotiated extended terms of Walgreens' DEA commitments and additional requirements to ensure that the company would (1) fulfill its obligations as a DEA registrant and (2) implement appropriate reporting provisions so that the Walgreens' board of directors could effectively monitor the company's compliance with the law.