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.