Norfolk Pension Fund has won a class action against a US pharmaceuticals company, in which it was found liable for securities fraud.

Represented by Robbins Geller Rudman and Dowd LLP, the jury’s verdict against the defendants, Puma Biotechnology Inc (Puma), was the culmination of around four years of litigation and a three-week trial throughout which Norfolk Pension Fund served as the lead plaintiff on behalf of all defrauded investors.

The jury in the United States District Court for the Central District of California, in Santa Ana, California has found that Puma, which is listed on the Nasdaq, and its CEO and Chairman, Alan H. Auerbach, committed securities fraud and are liable to compensate a class of investors who purchased Puma shares between 22 July 2014 and 13 May 2015 at prices inflated by the defendants’ misconduct.

The case is only the fifteenth securities fraud class action to be tried to a verdict since passage of the Private Securities Litigation Reform Act in 1995, the jury found that Puma and Auerbach knowingly misled investors about the effectiveness of a breast-cancer drug called neratinib, sold commercially under the name Nerlynx.

The jury determined that the fraud inflated Puma’s share price by $4.50, which is over 15 per cent of the price at which Puma’s shares currently trade and which may cost defendants, when all claims are counted, up to $100m.

The case against Puma and Auerbach featured forensic evidence showing that Auerbach had created counterfeit official meeting minutes of the US Food and Drug Administration (FDA) to advance the defendants' fraudulent scheme. Auerbach sent these forged minutes to underwriters of a $218m public stock offering in 2015.

Commenting on the verdict, Norfolk Pension Fund chairman, Judy Oliver, said: “We are pleased with the jury’s findings in favour of investors, that a financial recovery in which Norfolk Pension Fund will participate has been won, and that this verdict may bring significant improvement to Puma’s management. It is important that asset owners hold companies and executives to account when securities fraud is discovered.

“All affected investors can benefit when one of their number is willing to speak for all, and we believe it is appropriate for the fund to participate by taking its turn to lead such cases. This forms part of our commitment to being a good steward of our members’ pension assets, our recognition of our wider responsibilities as an institutional investor, and importantly recognises the fiduciary obligations we owe towards our Fund members and beneficiaries to get the best possible return on investments for them.”

The fund’s lawyer, Robbins Geller Rudman and Dowd LLP partner, Mark Solomon, said: “We were assiduous in prosecuting this case to recoup losses suffered by investors at the hands of Puma Biotechnology and Alan Auerbach. The jury verdict underscores that cheating executives can be held to account for their actions. The fight to improve governance and integrity within boardrooms globally will be advanced significantly if more fraud cases are vigorously prosecuted by investors such as Norfolk.”

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