BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific Arabic Spanish Russian Chinese Welsh

 You are in: Business
Front Page 
UK Politics 
Market Data 
Your Money 
Business Basics 
Talking Point 
In Depth 

Commonwealth Games 2002

BBC Sport

BBC Weather

Tuesday, 5 February, 2002, 18:18 GMT
Irish drugs firm hit by lawsuits
Irish drugs company Elan has dismissed investor allegations that it used misleading accounting practices.

The company said the lawsuits filed on behalf of US investors were "without merit"

Elan is the latest company to fall victim to increased investor suspicion of off-balance-sheet vehicles, the accounting mechanism which allowed Enron to fudge its true figures and which ultimately led to its downfall.

Shares in the company - once Ireland's biggest by market capitalisation - have plunged on news of the lawsuit.

Without merit

Milberg Weiss Bershad Hynes & Lerach initiated proceedings in a southern California federal court.

In a separate filing, Wolf Haldenstein Alder Freeman & Herz said it had filed a class action lawsuit in a New York federal court.

The Elan accounting system allows the company to shift some of its research and development partnerships off its income statement.

At the same time, it allows the company to record technology licensing fees as contract revenue.

Confusion also exists because it filled accounts according to US and Irish accountancy rules, resulting in two different sets of figures.

The suspicions grew when the company warned earlier this week that this year's profit could be as much as 34% lower than expected.

Last summer, the company had a market capitalisation double the size of any other Irish company.

On Tuesday, it had fallen to fourth in the list of Ireland's largest firms.

Investor suspicions

Attention has not just focused on Elan, but also GECC and Tyco, as investors became more suspicious in the wake of the Enron collapse.

"What you have is the exposure of problems that were covered up by the prosperity and the internet bubble of the late 1990s," said Fred Isquith, a lawyer at Wolf Holdenstein in New York.

The BBC's Manuela Saragosa
"The mounting Enron is having a major impact on investors' attitudes to other big companies"
Fred Isquith, attorney, Wolf Holdenstein
"You have got accountants not doing their jobs"
See also:

05 Feb 02 | Business
Enron ex-boss ordered to testify
Internet links:

The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories