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Former CEO must repay company $6.7 million for misconduct, including sexual harassment

The Massachusetts Supreme Judicial Court has ruled that the former president and CEO of a pharmaceutical company must repay the company $6.7 million in salary and bonuses he collected from 1990 through 1996, when he was fired for harassing female employees and misappropriating company funds. Those charges led to civil lawsuits against the former CEO, Lars P.E. Bildman, and the company, Astra USA, Inc (Astra), including a $9.8 million settlement in February 1998 with the Equal Employment Opportunity Commission (EEOC) to compensate the harassment victims, and a 35-count criminal indictment Bildman and others. The settlement with the EEOC was, at that time, the largest in the agency’s history. (Astra USA, Inc v Bildman, MassSupJudCt, October 5, 2009)

A Massachusetts Superior Court jury found Bildman liable to Astra for fraud, conversion, waste of corporate assets, breach of fiduciary duty, and sexual harassment of Astra employees, and awarded Astra damages in the aggregate amount of $1,040,812. The same jury found Astra not liable to Bildman for breach of a 1993 employment agreement between the parties, but awarded Bildman $203,691 in damages related to a March 1996, supplemental stock grant. Following a post trial evidentiary hearing, the trial court judge ruled that Astra could not recover by forfeiture the compensation it paid to Bildman from 1990 through his termination in June 1996, the period in which he breached his fiduciary obligations to Astra.

The Massachusetts Supreme Judicial Court, on its own initiative, transferred the case from the Appeals Court. The Massachusetts high court overturned the lower court’s decision regarding forfeiture of the salary and bonuses, finding that New York’s faithless servant doctrine allowed the company, which was incorporated in New York but had it principal place of business in Massachusetts, to go after $5.6 million in salary and $1.2 million in bonuses paid to Bildman.

However, it affirmed of trial court’s pre-trial judgments that Astra could not rescind the 1993 employment agreement and that the company could not recover its costs for the sexual harassment investigation. The state high court also affirmed the ruling awarding Bildman the $203,691 in damages related to the supplemental stock grant, finding that, on appeal, Astra waived any claim of forfeiture of that award. In addition, the state high court affirmed the trial judge’s dismissal on summary judgment of Bildman’s claim for attorney's fees and costs under his employment agreement and his libel claims against the company and two officials. The Massachusetts Supreme Judicial Court remanded the case to the Superior Court for entry of judgments consistent with the high court’s opinion.

Reprinted with permission. © CCH
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