When we first examined Wade Miquelon’s suit against his former employer, Walgreen, we didn’t have access to his complaint. Now we do. The complaint sheds more light on Miquelon’s allegations, helping to explain why they are causing a spiral of problems for the drug company.
As you may recall from our last article on the case, Miquelon alleges that Walgreen defamed him (in layman’s terms, lied) when it told the Wall Street Journal and investors that he had botched the earnings forecast for the 2014 fiscal year, and that his finance unit was “weak” with “lax controls.” According to Miquelon’s complaint, Walgreen executives made these negative statements for an entirely different reason: they had an “unchecked desire” to push Walgreen’s merger with Alliance Boots to completion. Miquelon alleges that an activist investor had threatened him for being “too conservative,” and that rather than standing up for him, the company’s CEO and its largest shareholder decided to disparage him in order to “deflect investor disappointment” and push through the merger.
Miquelon’s complaint is also somewhat of a public relations document, because it praises his work and goes into his interactions with the CEO and shareholder in great detail. It even says that Miquelon was next in line to be CEO (although the complaint also says he turned down that chance, instead deciding to move on). As to the allegedly botched earnings forecast, the complaint says that Miquelon recognized the problem well in advance of the call in which the company announced it was withdrawing its earnings goal. It also says that he was pressured at the same time by the company’s CEO to raise his estimate of earnings per share that would result from the Alliance Boots merger. The most explosive allegation on this front is that the CEO told him that he had “no choice” but to approve a $6.00 earnings per share estimate, rather than a lower one that would hurt the merger.
There are lots of other fascinating legal and factual issues in the complaint. For example, Miquelon points out that under his severance agreement, he is required to sign an additional release before he can receive any severance benefits. He wants the court to decide that he does not have to sign the release in order to get benefits, if by doing so he would waive his right to bring his defamation case. The company is likely to take the position that the additional release is part of the agreement, and that if Miquelon wants to pursue his defamation case, he’ll have to give up the severance benefits.
Unsurprisingly, shareholders are reacting to Miquelon’s allegations. An activist investor, CtW Investment Group, wants the Walgreen board to create a special committee to investigate the earnings forecast that led to the lawsuit. CtW says that without this investigation, shareholders won’t be able to make an informed decision about the upcoming merger. As one commenter has stated, all signs lead to an “epic ‘he-said she-said’ battle” over Miquelon’s claims.