Quigley Pharma COO suspended on alleged financial deal with Karkus

By Lisa Kerner

Charlotte, N.C., May 19 - Quigley Corp. announced on Tuesday that it uncovered an allegedly improper financial relationship between shareholder Ted Karkus and subsidiary Quigley Pharma, Inc.'s chief operating officer, Dr. Richard A. Rosenbloom.

According to a Quigley news release, the company has documentary evidence of undisclosed payments from Karkus to Rosenbloom continuing at least since 2008.

Karkus admitted he loaned $55,000 to Rosenbloom, a Quigley news release claimed, but the company alleged that he said in sworn testimony that at no time did he have any financial arrangement with any employee of Quigley.

Quigley said that according to Rosenbloom's interview with company executives, Rosenbloom had been offered an increase in salary as well as an amount of stock to continue with the Karkus Group if the Karkus Group gained control of Quigley.

Rosenbloom, who violated company policy by not disclosing his alleged relationship with Karkus, has been suspended pending further investigations.

According to Quigley, Karkus violated federal securities laws by failing to disclose his arrangement with Rosenbloom in any proxy solicitation material.

Charles Phillips, COO of Quigley, refused to join Karkus in a proxy fight to unseat the company's management and board in April 2008. Karkus entered into a financial arrangement with Rosenbloom shortly thereafter, Quigley said.

Quigley is investigating whether Rosenbloom communicated any material non-public information to Karkus, who has nominated himself and six others for election to Quigley's board of directors at the annual meeting on Wednesday.

Karkus questions review

Karkus said on Tuesday he believes that Quigley's announcement made Monday that it will explore strategic alternatives is "an 11th hour attempt to obtain shareholder votes."

"Shareholders should ask why the incumbents released this announcement just two days before the shareholder meeting," Karkus said in a news release, adding that "a responsible board should always be reviewing the company's strategic alternatives."

Quigley said on Monday that its board of directors and management will immediately begin a process to explore strategic and financial alternatives including licensing, joint venture and the sale of its Pharma division.

The review process will begin as the company awaits the complete statistical results of the phase IIB trial for its QR-333 (diabetic peripheral neuropathy) compound.

Quigley said it is also committee to further cost reductions in the area of compensation for certain executives and other operating areas due to the reduced performance of its over-the-counter business segment.

As previously reported, RiskMetrics Group/ISS and Glass, Lewis & Co. recommended that Quigley shareholders reject Karkus' solicitation seeking control of the board of directors.

While Glass Lewis supports the re-election of Quigley's board, RiskMetrics is supporting the election of a partial Quigley slate.

Quigley, based in Doylestown, Pa., manufactures and distributes homeopathic and health products in the United States.

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