By Tim Carpenter
Created December 3, 2009 at 2:27pm
Updated December 3, 2009 at 5:09pm
A Democratic candidate for Kansas governor led the California pharmaceutical firm that settled for $12.7 million a lawsuit alleging company executives engaged in securities fraud by hiding from investors damaging research on a new drug hyped by management as a medical marvel and financial sensation.
Thomas Wiggans, of Olathe, launched his campaign for governor in November by pledging to apply his “common-sense business practices” to state government.
He was chief executive officer of Connetics Corp. throughout the effort to shield Wall Street analysts from tests demonstrating an acne gel under development by the company in Palo Alto, Calif., caused cancerous skin tumors in more than half the laboratory mice treated with the medication.
The lawsuit alleges Wiggans and other senior executives at Connetics concealed health risks of Velac gel for nearly a year after research financed by the company identified the drug as a carcinogen in 2004. While the company remained silent on the study, Wiggans sold $2 million in Connetics stock. Other company executives also shed holdings in Connetics. Public disclosure of the acne gel’s shortcomings in 2005 decimated the company’s value.
Among the largest institutional losers in the crash was the Teachers’ Retirement System of Oklahoma. A series of shareholders filed federal lawsuits. Their claims were consolidated into a class-action suit in San Francisco.
Seven days before Wiggans announced his candidacy in Kansas, a federal judge in California put her signature to final pieces of the deal ending a three-year legal battle waged by investors against Connetics, Wiggans and three of his corporate lieutenants. The settlement doesn’t require the defendants to take formal responsibility, and Wiggans didn’t mention the case when he launched his bid for the Democratic nomination for governor.
When contacted Thursday by The Topeka Capital-Journal, a spokeswoman for Wiggans said the case was settled to end the protracted litigation.
“There was a settlement reached, agreed to by both parties,” said campaign spokeswoman Amy Jordan-Wooden. “There were no findings of wrongdoing. Tom is not liable.”
She said Wiggans’ ability to maneuver through the difficult environment demonstrated skills required of the next governor to extricate the state from the recession.
“He is uniquely and best suited in the race for governor,” she said.
Wiggans, 57, is competing against Herb West, of Paola, for the Democratic nomination for governor. The Republican candidate for the GOP nomination is U.S. Sen. Sam Brownback, a Topekan who ran for president two years ago. Democratic Gov. Mark Parkinson said he wouldn’t seek election to the office in 2010.
David Kensinger, campaign manager for Brownback, said Wiggans and colleagues at Connetics made decisions that cost outside investors millions of dollars.
“He is exactly the sort of person the Democratic Party claims to want to protect us from - except in Kansas, where the Democratic Party wants to make him governor,” Kensinger said.
Larry Gates, chairman of the Kansas Democratic Party, said settlement of the lawsuit wouldn’t tarnish Wiggans’ bid for office. He said voters were more interested in who can advance policy that promotes economic prosperity in Kansas.
“Tom Wiggans created economic value for his shareholders, for his employees,” Gates said.
However, the chairwoman of the Kansas Republican Party said Wiggans’ leadership at Connetics should be part of the campaign debate.
“It is difficult to imagine Kansas Democrats would actually nominate a corrupt pharmaceutical executive from California for governor,” said GOP chairwoman Amanda Adkins.
The acne drug blocked in 2005 by the U.S. Food and Drug Administration was never released to the public, because the company couldn’t prove the efficacy and safety of Velac gel. In the early research, 56 percent of laboratory mice contracted skin cancer from the product. The plaintiffs’ medical specialists suggested a 2 percent to 3 percent incidence of cancer in mice might not be alarming, but anything above 20 percent would be “clearly significant.”
In settling the class-action lawsuit, Connetics and the four named defendants - Wiggans, Gregory Vontz, John Higgans and Lincoln Krochmal - weren’t required to admit fault.
Wiggans, a fresh face in Kansas politics who has never sought public office, has avoided interviews since stepping forward Nov. 17 as a candidate for governor. He has been preparing for an introductory campaign tour of the state in January.
In a statement announcing his candidacy, Wiggans highlighted his 12 years of leadership at Connetics.
“It’s been an extremely rewarding career and I am very proud of the positive impact I’ve helped make in the lives of many people in Kansas and elsewhere,” Wiggans said in the statement.
Wiggans was Connetics’ ninth employee and climbed the ladder from 1994 to 2006 to become president and chief executive officer.
He left in December 2006 when the company was sold for $640 million and after a Connetics executive involved in clinical trials on Velac gel was charged by the U.S. Securities and Exchange Commission with insider trading for dumping stock before the market implosion. That executive and a business accomplice were fined more than $1 million by the SEC.
Jordan-Wooden, of the Wiggans campaign, said Connetics cooperated with the SEC during investigation of trading violations by the employee, who was eventually fired. She said the SEC didn’t take action against Connetics or Wiggans.
A native of Fredonia, Wiggans moved back to Kansas in January. He began his career after earning a pharmacy degree at The University of Kansas.
Wiggans is our Democratic candidate for Governor. “Larry Gates, chairman of the Kansas Democratic Party, said settlement of the lawsuit wouldn’t tarnish Wiggans’ bid for office. He said voters were more interested in who can advance policy that promotes economic prosperity in Kansas.” I wonder what he’s been smoking?