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Pan Collapse – Court awards $55m

Legal therapy gets Pan founder Jim Selim $55m

Susannah Moran | August 15, 2008

IN the weeks after a faulty batch of travel sickness medication sent people across the country into bizarre and dangerous hallucinations, a group of senior officers from the country's drug regulator met to discuss the crisis.

With 19 people in hospital suffering symptoms including heart palpitations, nausea and psychotic episodes, the officers of the Therapeutic Goods Administration knew they needed to act.

They had identified a culprit: the anti-nausea drug responsible for the wave of illness was Travacalm. And perhaps serendipitously for the TGA - at least at the time - it was made by a company the commonwealth body had a long history with - Pan Pharmaceuticals.

Records of the March 2003 meeting showed the group had steely determination to shut down Pan, founded by Egyptian-born Jim Selim in 1974.
In the 1990s, the TGA had pursued the company, all the way to the High Court, without success. This time, there would be no mercy. "Go for the jugular," one officer said at the meeting.

It was the first indication the TGA was prepared to bend the rules to get Mr Selim. Within a month, the TGA had ordered a recall of all of Pan's 1600 products and cancelled its licence.

The company, worth more than $300 million on the Australian Stock Exchange, collapsed, sending shockwaves through the complementary medicine industry, costing investors and creditors millions, and sullying the reputation of its founder, Mr Selim. But he fought back, suing the TGA for $234 million in the Federal Court, citing a vendetta against him.

Yesterday, five years after he was ruined by the TGA, he had an astonishing win.

The case settled publicly in his favour, with the Government agreeing to pay him $55 million - the figure he had asked for in settlement negotiations.
The Federal Court was told yesterday that the Government had agreed to a judgment being entered in favour of Mr Selim, who claimed the TGA had breached its duty of care and engaged in misfeasance in public office, or abused its powers.

The $55million payment may be the tip of the iceberg, with the Government potentially facing a slew of litigation from employees who lost their jobs, shareholders and other businesses affected by Pan's closure, from pharmacies to fellow drug manufacturers.

Outside the court, Mr Selim's legal adviser, Andrew Thorpe, called the settlement a "landmark" that would open the door for others to pursue legal action against the commonwealth over the Pan collapse. "What has happened today, I believe, is a landmark in Australian legal history," he said.

The Government has agreed to pay the money within 28 days, but the ordeal is not entirely over for Mr Selim, who is not only battling a recurrence of leukemia but will also have to spend more time in court.

Since Pan's collapse, he has also faced criminal charges. Accused of destroying evidence relating to Travacalm, he faced three jury trials before the case was ultimately dismissed for lack of evidence. The prospect for success in a separate criminal charge against Mr Selim for making or authorising a false statement for benefit, which returns to court next month, is probably being considered in the wake of yesterday's developments.

The rapid move towards a settlement in the TGA case came after several weeks of damaging court evidence by senior government officials. For the commonwealth body, the writing was on the wall late last month, when judge Arthur Emmett urged the parties to talk.

"If Mr Selim succeeds, his damages are going to be huge, aren't they?" Justice Emmett asked government barrister David Brogan.

"Yes, your honour," he replied.

"And the reputations of several senior commonwealth officers are going to be completely destroyed?"

"Yes."

The comments followed a particularly gruelling day of cross-examination of Rita Maclachlan, effective No2 at the TGA, who was in the meeting that discussed Pan's "jugular". The court heard that Ms Maclachlan misled an executive advisory committee, made up of industry experts, to decide whether Pan's products held an "imminent risk" of death, serious illness or serious injury to the public. Her evidence to the committee, that Pan products did indeed pose a risk, was used to back the TGA's heavy-handed action against Pan that, five years later, would end with the administration's very public humiliation.

After Justice Emmett's comments, the TGA made an approach to settle the case before any more of its officials gave evidence.

"First of all they proposed a confidential settlement and I said, 'No way'," Mr Selim told The Australian yesterday. "They have been deceiving me, deceiving the public, deceiving the Prime Minister. I said I will take this much, and not a cent less." Two hours before the two-week settlement offer expired, the Government agreed to Mr Selim's terms - $50 million and about $5 million in legal fees.

Yesterday the Government played down the result, saying the settlement involved "a judgment for the claimant, but does not involve the commonwealth conceding any of the specific allegations in the proceedings".

"They are in denial," says Mr Selim, who knocked back an offer to settle for a few million dollars early in the case.

What might have finally pushed the Government's lawyers to the negotiating table was the evidence of TGA officers such as Ms Maclachlan and Bob Tribe.

Mr Tribe had dutifully recorded the "jugular" comment at the March 2003 meeting. Standing in the witness box, he could not recall who said it. But five years after the event, he did express regret that he had not spoken out at the time.

At the time, the TGA, having identified Travacalm as the source of the illness afflicting travellers, was planning to issue a notice that it intended to suspend Pan's licence in 28 days. A week later it had changed its mind and was prepared to take much more drastic action.

Legal advice obtained by the TGA suggested that if Pan was given notice its licence was to be cancelled, Mr Selim could obtain a court injunction.

It was alleged in court that Ms Maclachlan misrepresented the internal legal as advice from the Australian Government Solicitor, using it as a green light to take immediate action against Pan. Ms Maclachlan's documents went all the way to John Howard's desk. But, she agreed in court, the AGS had actually told her to put the possibility of Pan getting an injunction "out of her mind".

In court, she admitted the deception was "unfortunate" but denied deliberately misleading Mr Howard or others in the bureaucracy and government.
So why the bad blood towards Mr Selim?

He believes it dates back to his 1990s skirmish with the TGA.

The TGA was ultimately unsuccessful in its bid to prosecute a company then owned by Mr Selim, Pan Laboratories, over claims it supplied 9 million tainted evening primrose capsules, imported from Thailand.

The TGA appealed through the courts but the High Court refused to hear its case.

Mr Selim said yesterday it was important to him to clear his name and restore his reputation in the wake of the Pan collapse.

The long-running court case has "made me stronger", he said, but he still wants an inquiry launched so that what happened to Pan cannot happen to any other Australian company. The Government yesterday ruled out an inquiry.

His leukamia returned last year and although he says he is feeling well, he believes he will soon have to have further medical treatment.

Mr Selim says his family had also been put under enormous stress and pressure and are relieved the case is over: "My wife said, 'I am going to have a party every day'. I said, 'No, you can count me out'."

Source: The Australian
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