The Guardian September 10, 2003


Pan Pharmaceuticals wash-up:
Workers wait as financial titans battle

by Bob Briton

As The Guardian goes to press, a second meeting of creditors of the 
failed complementary medicines manufacturer Pan Pharmaceuticals is due to 
take place in Sydney. At a rowdy meeting held in the Masonic Centre last 
week, the same creditors rejected an offer by a consortium led by textiles 
entrepreneur Fred Bart to take over and continue to operate the 
company.

Undeterred, Mr Bart and company founder Jim Selim will try once more to 
save Pan from liquidation and to spare Mr Selim the pain of lawsuits for 
around $100 million in damages resulting from the largest recall of 
medicinal products in history. The terms of the sale would see Mr Selim 
give up his 53 percent stake and release him from any further legal 
responsibility to Pan creditors.

The media has been full of claims and counter-claims recently about the 
propriety of the actions of Mr Selim, Mr Bart and the current administrator 
Tony McGrath.

The group with the most vital interest in proceedings, the creators of all 
the wealth being horse-traded by the major players, will also be 
represented at the meeting.

Workers' jobs

Pan's 114 full-time employees will again be represented by the Australian 
Workers Union (AWU) but, unfortunately for them, they are owed "only" 
$2.985 million in entitlements. Money talks loudest at meetings of this 
sort with votes being allotted on the basis of dollars owing. So the 
economic futures of the workers and their families will count for 
relatively little.

The AWU has been backing the Deed of Company Arrangement (DOCA) buyout 
being proposed by Fred Bart as the best chance of securing jobs and 
entitlements for their members. The alternative is to line up with all the 
other creditors to get what's owing to them from the $250 million personal 
fortune of Mr Selim. Pan's administrator Tony McGrath  who favours 
liquidation and the pursuit of Mr Selim and other directors  admits that 
the necessary course of legal action is "very expensive and very risky".

While Mr Bart asserts that he will pay workers and suppliers in full, 
others are unhappy that they would be put on a drip-feed that relies on the 
future profitability of a Pan Mk 2. Even in this best-case scenario, the 
DOCA would only repay these "contingent creditors" to the tune of 59 cents 
in the dollar. Efforts by Mr Bart and Mr Selim to sweeten the deal for 
these parties have so far been strongly resisted.

Fred Bart has accused administrator Tony McGrath from KPMG of a conflict of 
interests. KPMG has corporate links to the Mayne Group  the largest of 
the contingent creditors  claiming $45 million worth of damages resulting 
from the Pan recall.

Mr Selim is also in a fighting mood. He is said to be considering a lawsuit 
against the Therapeutic Goods Administration (TGA)  the Commonwealth 
authority responsible for the audits that led to the withdrawal of Pan's 
manufacturing licence.

He maintains that the body is engaged in a vendetta against him and that he 
has never instructed anyone to substitute product or manipulate data. 
However, it was his claim that ingredients were only substituted at the 
request of distributors that seems to have re-opened the floodgates of 
revelations about Pan.

Catalogue of malpractices

The Australian recently ran a series of articles cataloguing the 
deplorable manufacturing practices being alleged. According to the 
company's own records, drugs contaminated with metal were passed for 
distribution. Contaminated evening primrose oil from an unregistered 
supplier in Thailand was said to be from a Canadian source. Drugs for human 
beings were cross-contaminated with antibiotics for animals. In another 
case, there was no evidence that sheep placenta was tested for potential 
pathogens (viral and bacterial disease causing agents).

The result of an eight-day investigation in February revealed that the 
Moorebank factory was dirty, with the same production lines being used for 
animal drugs, human drugs and cosmetics.

I "didn't know"

"There was compelling evidence of deliberate and systematic manipulation of 
finished product quality control testing raw data so as to misrepresent", 
the TGA found. Mr Selim claims that he knew nothing of the TGA's concerns 
in spite of the existence of the report.

However, it appears that the chemist and former manufacturer has had a long 
and difficult relationship with industry and professional overseers. In 
1975 the NSW Pharmaceutical Board suspended him from practicing pharmacy 
for replacing paracetamol in medicines with sugar lactose.

Ten years ago, Pan Laboratories was fined $280,000 after the TGA won 13 
convictions against the company for supply and export fraud. The ruling was 
overturned on a technicality relating to dates and the TGA gave up on the 
issue when the owners moved the target by changing the company's name.

There are many lessons for the labour movement in the Pan saga. The most 
important is that capitalists do not carry on their activities to meet 
human needs and provide jobs for workers out of the goodness of their 
hearts.

Resurrection?

Mr Selim told The Australian Financial Review that the resurrection 
of the company was important "in the interests of keeping workers in their 
jobs and ensuring supplies of vitamin and herbal products". One can only 
wonder what other philanthropic activities Mr Selim might be engaged in.

All capitalist enterprises are carried on only when they produce profits. 
The rest is verbiage and camouflage. It is the workers that have an 
undivided interest in safe products, secure jobs and steadily improving 
standards of living for working people. These objectives will be achieved 
only when the workers wrest control of the economic life of the country 
from the elites that currently have it.

Right here and now, unions will have to make choices from what is 
achievable but nobody should be deluded that certain groups of capitalists 
have jobs and other community needs at heart. The present situation is one 
in which the workers  who have produced the fortunes of Mr Selim and Mr 
Bart  and the overwhelming majority of the population, are small 
stakeholders when the crucial economic decisions are made.

If this humiliating state of affairs is to be rectified, socialism, in 
which the working people own and run the means of production, must be moved 
up the labour movement's list of priorities.

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