Last week, a behind-the-scenes brawl between at least two Elan (NYSE:ELN) board members and the rest of the directors, including CEO Kelly Martin, erupted into public view. At issue is corporate governance, but more specifically, a series of deals in which accusations of undisclosed conflicts of interests were raised concerning Martin and several board members.
The dissident board members - Vaughn Bryson, a former Eli Lilly (NYSE:LLY) CEO, and Jack Schuler, a former president at Abbott Laboratories (NYSE:ABT) - hired their own law firm to conduct an independent review, but Elan raced to court and received a one-week injunction to stop them. Elan claims the separate review will undermine its own examination, a curious position because it contradicts the role of independent board members. Bryson and Schuler could not be reached.
But the two sides are quarreling over various deals, notably the transaction last year in which Elan transferred Alzheimer’s assets to Johnson & Johnson (NYSE:JNJ), but others in which either Martin or various board members allegedly had undisclosed interests. There is also a dispute over the role of the McKenna law firm hired by the Elan board to review corporate governance practices, according to sources, who say the firm signed off last year on Elan’s practices, but was hired again to do an independent review.
Essentially, most of these are the same issues that have been raised by a dissident shareholder, Ib Sonderby, who recently launched a web sited called SaveElan and today introduced three candidates he is proposing for the Elan board (take a look). But battered from within and without, Martin late Monday issued an extraordinary, 18-page denunciation.
In his missive, Martin recounts various financial and pipeline accomplishments on his watch, and then attempts to debunk each of the allegations raised by his foes. “A number of shareholders have asked me to set the record straight and I want to take this opportunity to do so,” he writes. Curiously, the letter is not on the Elan web site, at least as far as we can tell, although it was distributed to shareholders (UPDATE: It is on the site, although not when we looked initially. Apologies for any confusion). If Martin and his allies are so confident of their position, perhaps they ought to let the alternative board review proceed and quell the speculation on investor boards (see this).