Aftermath of a Drug-Testing Firm
What happened to SFBC International, a once fast-growing drug-testing firm in Miami?
Hantman said Seifer was suspended with pay for 30 days. In mid-December, Grassley requested that Krinsky, Seifer and other employees come to Washington to be interviewed by his committee. On Dec. 19, a week after the report, Seifer resigned. Krinsky and Hantman resigned on Dec. 31, 2005. The company did not cite reasons for their departures.
Krinsky's severance agreement included a $1.8-million payment and the repayment of "reasonable attorneys' fees" related to the Senate and SEC inquiries. Hantman's cash payout totaled $2.025 million. SFBC noted in filings with the SEC that "had their employment agreements been terminated without cause, Arnold Hantman and Lisa Krinsky would each have been entitled to an immediate payment of three times their base salaries and immediate vesting of all outstanding options and restricted stock units" but that they each waived their right to 15,913 restricted stock units and 32,520 options.
At some point in December 2005, Seifer married Krinsky. Records indicate that between 1996 and 2005, the couple together or individually had acquired a Miami Beach condo, a home in Aventura, a house in North Captiva in Lee County and a $15-million waterfront mansion -- properties which Seifer and Krinsky have since refinanced for $26 million using an offshore company and a corporation called LAKJS Enterprises, documents show.
Taking over after Krinsky, Seifer and Hantman resigned was Jeffrey McMullen, who had joined SFBC in the company's 2004 $248-million acquisition of PharmaNet, a New Jersey-based pharmaceutical testing company. The company's stock rebounded slightly in the months following the resignations, but McMullen faced plenty of problems, including the dispute with the city over the condition of the Miami test center.
SFBC also operated clinical trial facilities in Fort Myers and two in Canada, but the Miami site remained the most profitable -- company documents and filings indicate it was handling more than two-thirds of SFBC's workload and generating 30% of the company's operating profits. Ultimately, in May 2006, the Miami-Dade County Unsafe Structures Board deemed the building "unsafe" and ordered it demolished. The site is up for sale, and the building has been razed.
The shareholders suit mentions the condition of the facility as part of the securities fraud allegations. With litigation still pending, the company declined to comment about the building. "It's a difficult situation. I do apologize about that, but we really can't comment," replied company spokeswoman Anne-Marie Hess.
Following the county's demolition order, SFBC's stock again plummeted, and the company decided to phase out all of its Florida operations and shift ongoing trials to its clinics in Canada. The company also severed its ties with more Miami staffers, including former president of corporate development Gregory Holmes, who resigned in June.
"Following the recent decision to shut down the company's operations in Florida, we mutually agreed to Greg's departure because his focus had largely been related to these operations," McMullen said.
In August 2006, the company officially closed its Miami headquarters, changed its name to PharmaNet Development Group and moved its operations to Princeton, N.J., to build on the reputation and strong market positions of its PharmaNet and Anapharm subsidiaries. "The name change comes at a dynamic period for the company and our clients," McMullen said. "We have realigned corporate functions and established the right corporate executive management team to focus on building a long-term sustainable business that will enhance client and shareholder value."
Since the move, the company has rebounded. PharmaNet reported net earnings of $3 million for the third quarter of 2006, and the company's stock has been trading for about $21 a share, up from about $14.50 in June 2006.