Kan. gov. candidate's firm settled fraud lawsuit

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By JOHN HANNA

AP Political Writer

TOPEKA, Kan. (AP) -- Kansas Democrats' presumed nominee for governor was a defendant in a federal lawsuit alleging he and his former pharmaceutical company misled investors, a case recently settled for almost $12.8 million.

The lawsuit in California alleged Tom Wiggans and other executives of Connetics Corp., of Palo Alto, Calif., hid problems with an acne gel from investors and financial markets. It also alleged the company and executives, including Wiggans, made false statements in federal filings. The defendants denied the allegations.

The case became an issue in the governor's race Thursday, when The Topeka Capital-Journal published a story about it on its Web site. In San Francisco, a federal judge approved the settlement in October and issued an order on attorneys fees in November, just a week before Wiggans, now an Olathe resident, announced his candidacy.

Wiggans is the only Democrat actively campaigning for the party's nomination in the August 2010 primary, and he has the support of party leaders. The presumed Republican nominee is U.S. Sen. Sam Brownback, who faces only token opposition for the GOP nomination.

Wiggans spokeswoman Amy Jordan Wooden told The Associated Press that the lawsuit was not a cause for concern.

"Unfortunately, legal matters are one of the challenges any business will face from time to time. Tom was able to lead Connetics through this situation, with no findings of wrongdoing," Jordan Wooden said.

She told the Topeka newspaper that defendants settled the lawsuit to avoid lengthy litigation and, "there were no findings of wrongdoing. Tom is not liable."

Brownback campaign manager David Kensinger and Kansas Republican Party Chairwoman Amanda Adkins immediately labeled Wiggans "a corrupt pharmaceutical executive from California."

The lawsuit was filed by shareholders, including the Teachers' Retirement System of Oklahoma. It alleged Connetics had a "culture of deceit."

According to the lawsuit, Wiggans was Connetics' president from July 1994 until February 2005, remained a shareholder afterward and served as chairman of its board of directors.

In 2004, the company was developing a prescription gel for fighting acne. But, according to the lawsuit, a medical study showed by mid-June 2004 that 56 percent of the mice treated with it developed cancerous skin tumors.

The lawsuit alleges the company, Wiggans and other executives hid the problem until June 2005.

Also, the lawsuit suggested that Wiggans and others engaged in suspicious stock sales after learning of the gel's problems. According to the lawsuit, Wiggans sold nearly 173,000 shares for $3.3 million after the company learned of the problem.

But in a reply, the defendants said that even after their stock sales, they still held the vast majority of their shares. The defendants said plaintiffs were claiming "fraud by hindsight" and had failed to demonstrate that the company and executives had made statements they knew to be false.

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The lawsuit is Fishbury Limited, et. al., v. Connetics Corp., et. al., No. 07-cv-02940 in U.S. District Court for the Northern District of California.

On the Net:

Tom Wiggans' campaign: http://www.wiggansforkansas.com/

Sam Brownback's campaign: http://www.brownback.com/

U.S. District Court, Northern District of California: https://ecf.cand.uscourts.gov/cand/index.html