IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION 

PATRICIA GOODMAN, derivatively on behalf of 

ABBOTT LABORATORIES,

Plaintiff, 

v. 

MILES D. WHITE, ROBERT J. ALPERN, M.D., 

ROXANNE S. AUSTIN, W. JAMES FARRELL, H. 

LAURANCE FULLER, EDWARD M. LIDDY, PHEBE N. 

NOVAKOVIC, WILLIAM A. OSBORN, SAMUEL C. 

SCOTT III, GLENN F. TILTON, K. FRANK AUSTEN, 

M.D., DUANE L. BURNHAM, PAUL N. CLARK, 

WILLIAM M. DALEY, RICHARD A. GONZALEZ, 

JACK M. GREENBERG, THOMAS R. HODGSON, 

DAVID A. JONES, JEFFREY M. LEIDEN, M.D., PH.D., 

THE RT. HON. LORD DAVID OWEN CH, ROBERT L. 

PARKINSON, JR., BOONE POWELL, JR., ADDISON 

BARRY RAND, W. ANN REYNOLDS, PH.D., ROY S. 

ROBERTS, WILLIAM D. SMITHBURG, JOHN R. 

WALTER, and WILLIAM L. WEISS, 

Defendants, 

-andABBOTT LABORATORIES, 

Nominal Defendant. 

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CASE NO: 

_______________ 

JURY TRIAL 

DEMANDED 

VERIFIED SHARHOLDER DERIVATIVE COMPLAINT

For Plaintiff Patricia Goodman’s (“Plaintiff”) Verified Shareholder Derivative 

Complaint, Plaintiff alleges the following upon personal knowledge as to herself, and upon 

Case: 1:11-cv-07940 Document #: 1 Filed: 11/08/11 Page 1 of 37 PageID #:1
information and belief as to all other allegations, based upon her attorneys’ investigation of 

information pertinent to the claims herein alleged:1

NATURE OF THE ACTION

1. This is a shareholder derivative action brought pursuant to Federal Rule of Civil 

Procedure 23.1 on behalf of nominal defendant Abbott Laboratories (“Abbott” or the 

“Company”), against the current members of the Company’s Board of Directors (the “Board”) 

and certain former directors and officers of Abbott. Plaintiff seeks injunctive and other relief 

against defendants for breaches of fiduciary duties owed to Abbott arising out of the Company’s 

illegal off-label marketing of the drug Depakote. These breaches of fiduciary duties have 

substantially injured and will continue to substantially injure the Company. 

2. Abbott is a broad-based health care company that discovers, develops, 

manufactures, and markets products and services that span from prevention and diagnosis to 

treatment and cure. Abbott’s principal businesses are pharmaceuticals, nutritional and medical 

products, including diagnostics and cardiovascular devices. 

3. According to Abbott’s website, the drugs Depakote (divalproex sodium delayedrelease tablets) and Depakote ER (divalproex sodium extended-release tablets) are used to treat 

acute manic episodes associated with bipolar disorder, and to prevent migraine headaches in 

adults. Moreover, Depakote, Depakote ER, and Depakote Sprinkle Capsules (divalproex sodium 

coated particles in capsules), when taken alone or with other seizure medications, are used to 

treat seizure disorders in adults and children ten years of age and older, and the seizure disorders 

need to include complex partial seizures or simple and/or complex absence seizures. 

 

1

 Plaintiff has principally derived the facts alleged herein from sources including United States 

Securities and Exchange Commission (“SEC”) filings, newspaper articles, websites, including 

that of the Food and Drug Administration (“FDA”), and the Amended Complaint filed in United 

States ex rel. McCoyd v. Abbott Laboratories, No. 1:07-cv-00081-SGW (W.D. Va.) (the “qui 

tam Amended Complaint”).

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4. As current or past directors and/or officers of Abbott, each of the Director 

Defendants (as defined herein) owe and have owed Abbott and its shareholders the fiduciary 

duties of loyalty and due care in the management and administration of the Company’s affairs. 

As more fully described herein, the Director Defendants caused and/or allowed Abbott to 

knowingly engage in repeated and persistent violations of federal regulations. For over a decade, 

Abbott marketed Depakote, Depakote ER, and Depakote Sprinkle Capsules for uses not 

approved by the FDA, or “off-label” uses, in violation of applicable law. 

5. Beginning in or around 1998, Abbott took substantial measures to market the 

drugs for off-label uses, specifically targeting, among others, elderly patients suffering from 

Alzheimer’s disease or dementia, and children. As a result of the off-label marketing of 

Depakote, Abbott and the Director Defendants have profited substantially, with the Company 

making billions of dollars as a result. 

6. Due to the improper off-label marketing of Depakote, Abbott has tentatively 

agreed to pay at least $1.3 billion to settle claims by the United States government and twentyfour states. The tentative agreement reached among Abbott executives, federal prosecutors, and 

state officials will require Abbott to pay approximately $800 million to resolve civil claims and 

approximately $500 million in criminal penalties. As alleged herein, the Director Defendants’ 

sustained action and/or failure to act to protect the Company in the face of systematic violations 

of applicable law resulting from the off-label marketing of Depakote has resulted in what is to be 

the third largest settlement for illegal pharmaceutical marketing in United States history. 

7. On October 19, 2011, Abbott announced that it had reserved $1.5 billion “related 

to ongoing settlement discussions in the previously disclosed investigation by the U.S. 

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Department of Justice, through the U.S. Attorney for the Western District of Virginia, related to 

Depakote.” 

8. As detailed herein, current and former directors and/or officers of the Company 

caused and/or allowed Abbott to off-label market Depakote for a substantial period of time, 

despite knowing that Abbott was violating the law and could face substantial monetary fines and 

criminal liability in connection with its misconduct. The wrongdoing detailed herein was not 

misconduct perpetrated at the bottom levels of the Company hidden from the view of senior 

managers and directors. The Director Defendants’ actions (and inaction) were serious and 

substantial violations of their fiduciary duties to the Company’s shareholders. 

JURISDICTION AND VENUE

9. This Court has jurisdiction over the subject matter of this action under and 

pursuant to 28 U.S.C. § 1332(a) because this action is an action for, inter alia, damages in excess 

of $75,000, exclusive of interest and costs, and there is complete diversity of citizenship. 

10. This action is not a collusive one to confer jurisdiction on a Court of the United 

States that it would not otherwise have.

11. Venue is proper in this District because Abbott is incorporated in this District and 

headquartered here.

THE PARTIES

12. Plaintiff currently owns shares of Abbott common stock, and has continuously 

owned shares in Abbott at all times relevant to this action. Plaintiff brings this action 

derivatively in the right and for the benefit of Abbott. Plaintiff will fairly and adequately 

represent the interests of Abbott and its shareholders in enforcing the rights of the Company. 

Plaintiff is a citizen of Florida. 

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13. Nominal defendant Abbott is a citizen of Illinois. Abbott is an Illinois 

corporation headquartered in Chicago, Illinois. As alleged above, Abbott discovers, develops, 

manufactures, and markets products and services that span from prevention and diagnosis to 

treatment and cure. Abbott’s principal businesses are global pharmaceuticals, nutritional and 

medical products, including diagnostics and cardiovascular devices. Abbott manufactures and 

markets Depakote, Depakote ER, and Depakote Sprinkle Capsules, the manufacture of which is 

governed by federal law and regulation, and many of its activities are regulated by the FDA. 

Abbott’s common shares are traded on the New York Stock Exchange, and shares are also listed 

on the Chicago Stock Exchange and are traded on various regional and electronic exchanges. 

Abbott’s shares are also listed on the London Stock Exchange and Swiss Stock Exchange. 

The Director Defendants

Current Director Defendants 

14. Defendant Miles D. White (“White”) has been a director of the Company since 

April 1998 and has served as Chairman of the Board since 2000. White was elected Executive 

Vice President on February 13, 1990, and elected Chief Executive Officer (“CEO”) in January 

1999. 

15. Defendant Robert J. Alpern, M.D. (“Alpern”) has served on the Company’s Board 

since October 2008. Alpern has been a member of the Public Policy Committee since April 

2010. 

16. Defendant Roxanne S. Austin (“Austin”) has served as an Abbott director since 

December 2000. Austin has served on the Audit Committee since April 2001 and as Chairman 

since April 2007. She has also served on the Public Policy Committee since April 2003. 

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17. Defendant W. James Farrell (“Farrell”) has served on the Company’s Board since 

January 2006. Farrell has been a member of the Compensation Committee and Nominations and 

Governance Committee since April 2006. 

18. Defendant H. Laurance Fuller (“Fuller”) has been a director of Abbott since 1988. 

Since joining the Company, Fuller has served on: the Compensation Committee, and was the 

Chairman from April 1997 until April 2003; the Board Affairs Committee until April 1997; and 

the Nominations and Governance Committee as Chairman since April 2003. 

19. Defendant Edward M. Liddy (“Liddy”) has been an Abbott director since June 

2010 and has served on the Audit and Compensation Committees since June 2010. 

20. Defendant Phebe N. Novakovic (“Novakovic”) has served as an Abbott director 

since June 2010. Novakovic has been a member of the Nominations and Governance Committee 

and Public Policy Committee since June 2010. 

21. Defendant William A. Osborn (“Osborn”) has been a director of Abbott since 

January 2008. Osborn has served on the Compensation Committee since April 2008 and the 

Nominations and Governance Committee since April 2010. 

22. Defendant Samuel C. Scott, III (“Scott”) has been a director of the Company 

since April 2007. Scott has also been a member of the Audit Committee since April 2007. 

23. Defendant Glenn F. Tilton (“Tilton”) has served as an Abbott director since April 

2007. Tilton has served on the Audit Committee since April 2007. 

24. The defendants referred to in paragraphs 14 through 23 are collectively referred to 

hereinafter as the “Current Director Defendants.” 

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Former Director Defendants 

25. Defendant K. Frank Austen, M.D. (“Austen”) was an Abbott director from 1983 

until his retirement in April 1999. Austen served as a member of the Nominations Committee 

and Board Affairs Committee until April 1996, the Board Affairs Committee in April 1998, and 

the Audit Committee from April 1997 until April 1998. Austen is also a director of Humana 

Inc., along with Reynolds (defined below), and which Jones (defined below) co-founded. 

26. Defendant Duane L. Burnham (“Burnham”) served as a director of the Company 

from 1985 and was the Chairman of the Board and CEO until his retirement in January 1999. 

Burnham was elected CEO in 1989 and Chairman in 1990. 

27. Defendant Paul N. Clark (“Clark”) was a director of the Company from April 

1998 until December 1998. 

28. Defendant William M. Daley (“Daley”) served as an Abbott director from April 

2004 until January 2011. While at the Company, Daley served on the Compensation Committee 

from April 2004 until January 2011 and the Public Policy Committee from April 2005 until 

January 2011. 

29. Defendant Richard A. Gonzalez (“Gonzalez”) was a director of Abbott from 2001 

until his retirement in September 2007. Gonzalez was also the President and Chief Operating 

Officer (“COO”) of the Company until he retired in 2007. 

30. Defendant Jack M. Greenberg (“Greenberg”) served as an Abbott director from 

December 2000 until his retirement in April 2006. During his time at the Company, Greenberg 

served on the Compensation Committee in April 2000, the Nominations and Board Affairs 

Committee from April 2001 until April 2003, and was Chairman of the Audit Committee from 

April 2003 until his retirement. 

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31. Defendant Thomas R. Hodgson (“Hodgson”) was a director of the Company since 

1985 and served as President and COO from 1990 until December 1998. 

32. Defendant David A. Jones (“Jones”) served as an Abbott director from 1982 until 

his retirement in April 2003. During his time at the Company, Jones was a member of: the 

Nominations Committee until April 1997; the Board Affairs Committee until April 1997; the 

Audit Committee from April 1997 until April 2004; and the Public Policy Committee from April 

1999 until April 2003. He was also Chairman of the Nominations and Board Affairs Committee 

from April 1997 until April 2003. Jones is also the Co-Founder, Chairman, and CEO of Humana 

Inc. 

33. Defendant Jeffrey M. Leiden, M.D., Ph.D. (“Leiden”) was a director of Abbott 

since April 1999 and was President and COO from 1987 until 2000 and a member of the Audit 

and Public Policy Committees from April 1999 until his retirement. 

34. Defendant The Rt. Hon. Lord David Owen CH (“Owen”) served as a director of 

the Company from 1996 until his retirement in April 2011. During his time at the Company, 

Owen served on the Nominations Committee until April 1996; the Audit Committee from April 

1997 until April 2011; the Nominations and Board Affairs Committee from April 1997 until 

April 2002; and the Nominations and Governance Committee from April 2003 until April 2011. 

35. Defendant Robert L. Parkinson, Jr. (“Parkinson”) was a director of Abbott from 

April 1998 until his retirement in January 2001. While at Abbott, Parkinson served as President 

and COO since January 1999. 

36. Defendant Boone Powell, Jr. (“Powell”) served as a director of the Company from 

1985 until April 2009. During his time at the Company, Powell was a member of: the 

Nominations Committee until April 1996; the Audit Committee from April 1997 until April 

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2003; the Compensation Committee from April 1997 until April 2009; and the Public Policy 

Committee from April 2004 until April 2009. 

37. Defendant Addison Barry Rand (“Rand”) was a director of Abbott since 1992 and 

served on the Compensation Committee until April 2004; the Nominations Committee until 

April 1996; the Nominations and Board Affairs Committee from April 1997 until April 2002; 

and the Nominations and Governance Committee from April 2003 until April 2004. Rand also 

served on the board of Agilent Technologies, Inc. with Clark. 

38. Defendant W. Ann Reynolds, Ph.D. (“Reynolds”) served as an Abbott director 

from 1980 until her retirement in April 2010. During her time at the Company, Reynolds was 

Chairman of the Nominations Committee until April 1996; Chairman of the Audit Committee 

until April 1997; Chairman of the Public Policy Committee from April 2003 until April 2010; 

and a member of: the Nominations and Board Affairs Committee from April 1997 until April 

2002; the Public Policy Committee from April 1999 until April 2010; and the Nominations and 

Governance Committee from April 2003 until April 2010. Reynolds is also a director of 

Humana Inc., along with Austen. 

39. Defendant Roy S. Roberts (“Roberts”) was a director of the Company from April 

1998 until his retirement in April 2011. Roberts served on the Nominations and Board Affairs 

Committee from April 1998 until April 2002; the Public Policy Committee from April 1999 until 

April 2010; and the Nominations and Governance Committee from April 2003 until April 2010. 

He was also Chair of the Public Policy Committee in April 2010. 

40. Defendant William D. Smithburg (“Smithburg”) served as an Abbott director 

from 1982 until April 2011. During his time at the Company, Smithburg was on the 

Compensation Committee from April 1997 until April 2010; the Public Policy Committee from 

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April 1999 until April 2009; and the Audit Committee from April 2004 until April 2010. 

Smithburg was also Chair of the Public Policy Committee from April 1999 until April 2002 and 

Chair of the Compensation Committee until April 1997 and then from April 2003 until April 

2010. 

41. Defendant John R. Walter (“Walter”) was a director of the Company from 1990 

until September 2006. Walter served on the Audit Committee from April 1997 until April 2006 

and the Public Policy Committee from April 2001 until April 2006. 

42. Defendant William L. Weiss (“Weiss”) served as an Abbott director from 1984 

until his retirement in April 2000. While at Abbott, Weiss was Chairman of the Board Affairs 

Committee until April 1996 and a member of the Compensation Committee until April 2000. 

43. The defendants referred to in paragraphs 25 through 42 are collectively referred to 

hereinafter as the “Former Director Defendants.” The Current Director Defendants and Former 

Director Defendants are collectively referred to hereinafter as the “Director Defendants.” 

44. Due to their positions as current or former officers and/or directors of Abbott, and 

because of their ability to control the business and corporate affairs of the Company, the Director 

Defendants owed the Company and its shareholders the fiduciary obligations of loyalty and due 

care. The Director Defendants were and are required to act in furtherance of the best interests of 

the Company and its shareholders to benefit all shareholders equally, rather than to further their 

personal interests or other interests. Each director and officer of Abbott owes a fiduciary duty to 

the Company and its shareholders to exercise good faith and diligence in the administration of 

the affairs of the Company. 

45. To discharge their duties, the Director Defendants are required to exercise 

reasonable and prudent oversight and supervision over the management, policies, practices, and 

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controls of the Company. By virtue of such duties, the Director Defendants were and are 

required to, among other things: 

a. Manage, conduct, supervise, and direct the business affairs of Abbott in 

accordance with all applicable laws (including federal and state laws, government rules and 

regulations and the charter and bylaws of Abbott); 

b. Ensure that relevant FDA regulations under which Abbott operated were 

followed, that violations thereof were timely corrected, and that regulatory inquiries, comments, 

and warnings were responded to in a timely and effective fashion; 

c. Neither violate nor knowingly permit any officer, director or employee of 

Abbott to violate applicable laws, rules, and regulations; 

d. Remain informed as to the status of Abbott’s operations and upon receipt 

of notice or information of imprudent or unsound practices, to make a reasonable inquiry in 

connection therewith, and to take steps to correct such conditions or practices; 

e. Conduct reasonable investigations of relevant matters; 

f. Establish and maintain systematic and accurate records and reports of the 

business and affairs of Abbott and procedures for the reporting of the business and affairs to the 

Board and to periodically investigate, or cause independent investigation to be made of, said 

reports and records; and 

g. Maintain and implement an adequate, functioning system of internal 

controls, such that Abbott’s affairs and operations would be conducted in accordance with all 

applicable laws, rules, and regulations. 

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46. The Director Defendants, in light of their positions of control and authority as 

directors and/or officers of the Company, were able to and did, directly and indirectly, exercise 

control over the acts described herein. 

47. Each defendant herein is sued individually as a conspirator, aider, and abettor, as 

well as in his or her capacity as a present or past officer and/or director of Abbott, and the 

liability of each arises from the fact that each has engaged in all or part of the unlawful acts, 

schemes, procedures, or transactions described of herein. 

FACTUAL BACKGROUND

FDA Approval of Depakote 

48. A drug manufacturer must receive FDA approval for a prescription drug before 

the drug manufacturer markets or sells it. See 21 U.S.C. §§ 331, 355. Pursuant to 21 U.S.C. § 

355, drug manufacturers must file an application with the FDA, which the FDA subsequently 

reviews to determine whether the drug’s intended uses are safe and effective. 

49. Under the Food, Drug and Cosmetic Act (“FDCA”), 21 U.S.C. §§ 301-397, and 

the Public Health Services Act (“PHSA”), 42 U.S.C. § 262 et seq., drug manufacturers may not 

market or promote a drug for a use that the FDA has not approved. See 21 U.S.C. §§ 331; 42 

U.S.C. §§ 262(a)(1), (b); 21 C.F.R. § 601.12. Physicians may prescribe a drug for non-FDA 

approved uses. However, drug manufacturers may not market or promote to physicians a drug 

for uses other than those approved by the FDA, as this would constitute off-label marketing or 

misbranding under the FDCA. 21 U.S.C. §§ 331, 352; see also 21 C.F.R. § 202.1. 

50. According to the FDA’s website, Depakote was originally approved by the FDA 

in March 1983. To date, the drug has been approved for: (i) treatment of the manic episodes 

associated with bipolar disorder; (ii) monotherapy and adjunctive therapy in the treatment of 

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patients with complex partial seizures that occur either in isolation or in association with other 

types of seizures; (iii) sole and adjunctive therapy in the treatment of simple and complex 

absence seizures, and adjunctively in patients with multiple seizure types that include absence 

seizures; and (iv) prophylaxis of migraine headaches. 

51. According to the FDA’s website, Depakote ER was originally approved by the 

FDA in August 2000, and to date, has been approved for the following: (i) acute treatment of 

manic or mixed episodes associated with bipolar disorder, with or without psychotic features; (ii) 

monotherapy and adjunctive therapy of complex partial seizures and simple and complex 

absence seizures; (iii) adjunctive therapy in patients with multiple seizure types that include 

absence seizures; and (iv) prophylaxis of migraine headaches. 

52. Moreover, according to the FDA’s website, Depakote Sprinkle Capsules have 

been approved by the FDA for: (i) monotherapy and adjunctive therapy of complex partial 

seizures and simple and complex absence seizures; and (ii) adjunctive therapy in patients with 

multiple seizure types that include absence seizures. 

53. Although the Depakote drugs have been approved by the FDA for the uses 

discussed above, the drugs have serious potential side effects. The labels that accompany the 

drugs, which are available on the FDA’s website, warn of, inter alia, hepatotoxicity (or 

chemical-driven liver damage, including hepatic failure resulting in fatalities), pancreatitis 

(including life-threatening pancreatitis), teratogenic effects and other adverse effects in pregnant 

women, suicidal behavior and ideation, somnolence in the elderly, thrombocytopenia, 

hyperammonemia, hypothermia and multi-organ hypersensitivity reactions. 

54. Depakote, Depakote ER, and Depakote Sprinkle Capsules have not been approved 

for treatment of the following: 

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• Alzheimer’s disease or dementia or their side effects; 

• disorders or symptoms other than epileptic seizures in patients under the age of 

eighteen; 

• disorders or symptoms in children under the age of ten; 

• schizophrenia; 

• attention deficit hyperactivity disorder (“ADHD”); 

• insomnia; 

• mood disorder; 

• narcotic drug withdrawal; 

• post-stroke seizures; or 

• other forms of epilepsy. 

Off-Label Marketing of Depakote

55. Beginning in or around 1998, the Director Defendants caused and/or allowed 

Abbott to knowingly engage in repeated and persistent violations of federal law prohibiting the 

marketing of Depakote for uses not approved by the FDA. These actions will likely require 

Abbott to pay at least $1.3 billion to the United States government and twenty-four states, along 

with substantial costs associated with governmental investigations and negotiation of the 

settlement. 

56. According to the qui tam Amended Complaint, Abbott engaged in centrallyorganized plans to illegally market Depakote. Abbott promoted Depakote for non-FDA 

approved uses by employing numerous tactics, including, for example, concealing what appeared 

to be unbiased scientific and educational programs into avenues of promoting Depakote, and 

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providing incentives to physicians (monetary and otherwise) to encourage them to promote and 

prescribe Depakote for non-FDA approved uses. 

57. Abbott targeted its off-label marketing towards elderly patients suffering from 

Alzheimer’s disease or dementia. Abbott focused its efforts on, inter alia, nursing homes, 

assisted living developments, and long term care facilities, forming a sales division devoted to 

marketing Depakote to physicians and other health care professionals within these markets. 

58. According to the qui tam Amended Complaint, in or around 1998, Abbott created 

the “Long Term Care” division,2 devoted exclusively to marketing Depakote to long term care 

facilities for non-FDA approved uses. To facilitate off-label marketing of Depakote to the 

geriatric markets, Abbott provided training, incentives, and compensation packages to its sales 

representatives, who would then market Depakote to physicians and institutions and encourage 

them to use Depakote in place of psychopharmacological drugs manufactured by other 

pharmaceutical companies. 

59. Abbott hired outside consultants to train its sales representatives to off-label 

market Depakote to geriatric markets, which training took place off of Abbott’s headquarters. 

The Company also selected certain Company sales representatives to teach their off-label 

marketing skills to other sales representatives, and held mock sales meetings and calls. 

60. Abbott sales representatives were trained to use various off-label marketing 

techniques on physicians and other health care providers. For example, sales representatives 

were instructed to: use Company-approved sales aids in long term or skilled nursing facilities; 

provide physicians with data from expert consensus guidelines regarding dementia; and attend 

 

2

 The Long Term Care division was ultimately combined with several other divisions within the 

Company, which were collectively referred to as the Specialty Accounts division. 

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patient and caregiver support group meetings (including those sponsored by the Alzheimer’s 

Association) that provided patients with information about types of treatments for dementia. 

61. According to the qui tam Amended Complaint, Abbott also set aside significant 

resources for the Long Term Care division to educate physicians and other health care 

professionals about Depakote off-label uses. For example, Abbott representatives specially 

trained and provided written materials and presentations to health care professionals. Moreover, 

Abbott representatives, after securing advanced approval from Abbott’s headquarters, provided 

substantial payments to physicians (through intermediaries) to promote Depakote off-label uses 

to other physicians at various programs and lectures, dinners, Continuing Medical Education 

classes (“CMEs”), and other events. Abbott also provided monetary and other incentives to 

physicians who prescribed large quantities of Depakote, and physicians who Abbott believed 

would promote or prescribe Depakote in the future. Additionally, Abbott purchased data to use 

to gather prescribing information about physicians practicing in long term care facilities. 

62. Moreover, according to the qui tam Amended Complaint, Abbott’s marketing 

department also paid for speaker events at large national meetings, such as one event in March 

2003 hosted by AMDA (formerly the American Medical Directors Association), a professional 

association of medical directors, physicians, and others practicing in the long term care 

continuum, focusing primarily on Depakote off-label uses in nursing homes. Abbott also 

provided funding to entities to develop therapeutic guidelines and/or disease state management 

programs for treating symptoms associated with dementia. 

63. Abbott funded and created expert consensus pocket guidelines for use by 

physicians and other practitioners regarding the protocol for symptoms associated with dementia. 

Moreover, Abbott trained and required the Company’s representatives to use the guidelines to 

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recommend Depakote for treating symptoms associated with dementia, to educate physicians and 

practitioners regarding how to use Depakote to avoid Omnibus Budget Reconciliation Act3

requirements, and to suggest Depakote dosages for elderly patients. 

64. Targeting the elderly population placed these individuals at serious risk of injury, 

illness, and death, and also caused them financial harm. As mentioned above, Depakote’s label 

specifically warns of the side effect of “somnolence in the elderly.” Specifically, the Depakote 

label states, among other things, that “[a] higher percentage of patients above 65 years of age 

reported accidental injury, infection, pain, somnolence, and tremor[,]” and “[a] study of elderly 

patients with dementia revealed drug related somnolence and discontinuation for somnolence[.]” 

65. According to the qui tam Amended Complaint, Abbott also marketed Depakote 

Sprinkle Capsules for administration to elderly patients through feeding tubes. While there is no 

FDA-approved dosage for administration of Depakote Sprinkle Capsules through feeding tubes, 

Abbott representatives were directed to represent to physicians, other healthcare providers, and 

pharmacists that the drug may be administered this way. The current “Administrative Guide” 

that accompanies the drug’s label, which is available on the FDA’s website, states: 

Depakote Sprinkle Capsules (divalproex sodium coated particles in capsules) may 

be swallowed whole or the capsule contents may be sprinkled onto soft food such 

as applesauce or pudding. . . . 

Place all the sprinkles onto a small amount (about a teaspoonful) of soft food such 

as applesauce or pudding. 

Make sure that all of the sprinkle and food mixture is swallowed right away. Do 

not chew the sprinkle and food mixture. . . . 

66. Abbott representatives were instructed to use sales aids and instruction pamphlets 

to teach physicians and nurses how to correctly place the contents of Depakote Sprinkle Capsules 

 

3

 Among other things, the Omnibus Budget Reconciliation Act of 1987 regulates the use of 

psychopharmacologic drugs in nursing homes. 

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into feeding tubes and to distribute these instruction pamphlets. Abbott representatives were 

encouraged to promote Depakote Sprinkle Capsules mainly for geriatric patients who suffered 

from symptoms of dementia and who could not or refused to swallow tablets. However, as 

mentioned, Depakote Sprinkle Capsules are FDA approved only for monotherapy and adjunctive 

therapy of complex partial seizures and simple and complex absence seizures, and adjunctive 

therapy in patients with multiple seizure types that include absence seizures. Abbott 

representatives were also trained and instructed to recommend that long term health care 

providers place the contents of Depakote Sprinkle Capsules into patients’ foods, and focused on 

encouraging doctors to switch from another drug—valporate syrup, manufactured by other drug 

companies—to Depakote Sprinkle Capsules. 

67. According to the qui tam Amended Complaint, Abbott representatives were also 

trained and directed to provide instructions for “rapid loading doses” of Depakote to treat certain 

instances of acute mania. Representatives used sales aids and other materials produced by 

Abbott to assist in promoting to physicians the “rapid load” dosage of Depakote, although the 

drug does not have dosing instructions for “rapid loading.” Abbott also provided physicians with 

information on such dosages and paid at least one physician to produce a CME video on the 

topic. Representatives were also trained to encourage “rapid loading” of Depakote instead of 

using the drug Zyprexa (manufactured by another drug manufacturer) for individuals suffering 

from acute psychiatric symptoms, which is not an FDA-approved use of the drug. 

68. The Company’s sales force was also trained to provide instructions for Depakote 

“maintenance dosing” for symptoms associated with dementia, despite the lack of FDA approval 

for this dosage or disease. Sales representatives were trained to suggest to physicians high doses 

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69. According to the qui tam Amended Complaint, Abbott also off-label marketed 

Depakote for the treatment of a number of other diseases and illnesses. For example, Abbott 

marketed Depakote to treat developmental delay, behavior problems, psychiatric disorders, and 

ADHD in children under the age of eighteen. Depakote has only been approved for treatment of 

epilepsy in children ten years of age or older, and has not been approved for treatment of 

developmental delay, behavior problems, psychiatric disorders, or ADHD in children. 

Nevertheless, in violation of applicable law, Abbott sales representatives were trained and 

instructed to promote Depakote for off-label use at mental health facilities that did not treat 

children with epilepsy, but instead treated children for developmental delay, behavior problems, 

psychiatric disorders, and ADHD. 

70. Abbott masked off-label marketing of Depakote for unapproved uses in children 

by, for example, focusing on incidences of epilepsy that occur in children who have 

developmental problems, and focusing on symptoms that may be present in both children with 

epilepsy and developmental problems. Abbott also sought physicians or experts to promote 

Depakote for developmental delay. 

71. According to the qui tam Amended Complaint, Abbott off-label marketed 

Depakote for the treatment of depression associated with bipolar disorder in children and adults. 

As discussed above, Depakote has been approved by the FDA for treatment of only manic

episodes associated with bipolar disorder, and Depakote ER has been approved for acute 

treatment of manic or mixed episodes associated with bipolar disorder. However, neither has 

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been approved for the treatment of bipolar depression or for treatment of bipolar disorder in 

children. 

72. Abbott representatives promoted Depakote for these off-label uses and 

encouraged its use over drugs manufactured by other companies, such as Lamictal, which is used 

for the long-term treatment of bipolar I disorder. Abbott paid physicians to provide lectures to 

other physicians about bipolar depression and/or prescribing Depakote for treatment of bipolar 

depression. Abbott representatives were trained to market the drug for treatment of bipolar 

depression. They were taught to focus on the negative side effects of drugs such as Lamictal, 

and were taught how to respond to objections from psychiatrists regarding prescribing Depakote 

for treating children with bipolar disorder. Abbott representatives were also instructed to use 

only certain information from studies to discredit trials referenced in Lamictal’s sales aids, and to 

provide materials produced by Abbott that discussed Depakote off-label uses in children. 

73. According to the qui tam Amended Complaint, Abbott also marketed Depakote 

for the treatment of schizophrenia and other psychological disorders, which are not FDA 

approved uses of the drug. Company sales representatives were directed to use Abbott sales aids 

and studies to market Depakote for the treatment of psychosis or schizophrenia. 

74. Moreover, according to the qui tam Amended Complaint, Abbott off-label 

marketed Depakote for treatment of, inter alia, post-seizure stroke, epilepsy in children under the 

age of ten, and addictive narcotic drug withdrawal. For example, Abbott funded events where 

Abbott-paid physicians promoted the use of Depakote to treat symptoms of narcotic drug 

withdrawal, and created materials on this non-FDA approved use that were distributed to, among 

others, physicians paid to lecture on the off-label uses. Abbott also misrepresented that 

Depakote lowered cholesterol. Abbott sales representatives were instructed to inform physicians 

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that the drug had a “metabolically neutral” side effect, when in fact Abbott’s data indicated that 

Depakote lowered not only LDL cholesterol (the “bad” cholesterol), but also HDL cholesterol 

(the “good” cholesterol). Representatives used Abbott sponsored CME and study materials and 

sales aids to misrepresent this effect of Depakote. 

75. Beginning in 2007, several qui tam actions were filed against Abbott in 

connection with the Company’s off-label marketing of Depakote, which were ultimately 

consolidated in the United States District Court for the Western District of Virginia. 

76. Meredith McCoy, who was employed by Abbott as a pharmaceutical sales 

representative from February 1998 until June 2007 and who specifically promoted Depakote 

during that period, filed a complaint against Abbott on October 31, 2007, and subsequently filed 

the qui tam Amended Complaint on behalf of the United States of America, twenty-four states, 

the District of Columbia, and Chicago. In the qui tam Amended Complaint, plaintiffs alleged 

that Abbott (and several other defendants, whose names have not been publicly released) 

violated the False Claims Act, 31 U.S.C. § 3729 et seq., and similar state and municipal laws in 

connection with, among other things, off-label marketing of Depakote. Specifically, the qui tam

Amended Complaint alleged: 

[Abbott] knowingly presented or caused to be presented false or fraudulent claims 

to be submitted in violation of the law for payment or approval by federal and 

state agencies and/or programs by: 

• systematically engaging in illegal off-label marketing of Abbott’s 

anti-epileptic drug, Depakote (generic name divalproex sodium); 

• furthering the unlawful off-label marketing of Depakote through 

the transformation of ostensibly independent and unbiased 

educational and scientific programs, including physician 

continuing medical education (“CME”) programs, into 

promotional vehicles for Depakote; and 

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• unlawfully promoting Depakote in violation of the Anti-Kickback 

Statute, 42 U.S.C. § 1320a-7b(b), as amended by the Patient 

Protection and Affordable Care Act (“PPACA”), Public Law No. 

111-148, Sec. 6402(g), and the Stark Law, 42 U.S.C. § 1395nn, 

and 42 C.F.R. § 411.350 et seq. by providing cash and other 

incentives to induce doctors to promote and prescribe Depakote, 

including for off-label uses. 

77. The qui tam Amended Complaint further alleged: 

A substantial portion of Depakote prescriptions are paid for by Medicare, 

Medicaid and other government-funded health insurance programs. Prescriptions 

for uses other than those that are approved by the FDA or included in certain 

government-approved compendia are not reimbursable. 

The complaint alleged that these programs were harmed because, among other things, they paid 

for off-label prescriptions, were required to pay for treating negative side effects in patients who 

were prescribed Depakote, and health care providers submitted false claims to be paid by the 

programs. 

78. Moreover, the United States Department of Justice embarked on a civil and 

criminal investigation of Abbott, specifically in connection with its off-label marketing of 

Depakote. 

79. On at least one occasion, on January 22, 2009, the Division of Drug Marketing, 

Advertising, and Communications (“DDMAC”) of the FDA sent a letter (the “Warning Letter”) 

to Rick Leber, Regulatory Manager at Abbott, in connection with a specific marketing material, 

referred to therein as a Depakote ER/Depakote Continuum Care Pharmacy Formulary Flashcard 

for Depakote (the “Flashcard”). The Warning Letter stated, among other things, that “[t]he 

Flashcard is misleading because it . . . broadens the indication of Depakote ER[.] . . . Thus, this 

promotional material misbrands the drugs in violation of the Federal Food, Drug, and Cosmetic 

Act (the Act), 21 U.S.C. 352(a) and 321(n).” (Emphasis added). The Warning Letter further 

stated that “[t]he Flashcard is misleading because it implies that Depakote ER is indicated for use 

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in a broader range of mania patients than Depakote, when this is not the case.” (Emphasis 

added). The Warning Letter continued: “Additionally, we note that the Flashcard fails to include 

specific indications for Depakote.” In the Warning Letter, “DDMAC request[ed] that Abbott 

immediately cease the dissemination of violative promotional materials for Depakote and 

Depakote ER such as those described above.” 

80. On March 15, 2010, Abbott filed a Form DEF 14A with the SEC, which 

disclosed: “In accordance with Abbott’s articles of incorporation, Abbott has advanced defense 

costs on behalf of three former officers in connection with the United States Department of 

Justice’s criminal and civil investigation of Abbott’s Depakote sales and marketing activities.” 

(Emphasis added). 

81. Moreover, according to a Form DEF 14A filed by Abbott with the SEC on March 

15, 2011: 

In accordance with Abbott’s articles of incorporation, Abbott has advanced 

defense costs on behalf of two current and five former officers in connection 

with the United States Department of Justice’s criminal and civil investigation 

of Abbott’s Depakote sales and marketing activities. Abbott has advanced 

defense costs on behalf of a current officer in connection with AMO [Advanced 

Medical Optics, Inc., a subsidiary of Abbott]. 

(Emphasis added). 

82. On October 19, 2011, Abbott filed a Form 8-K with the SEC attaching as an 

exhibit a press release issued that day announcing Abbott’s financial results for the third quarter 

ended September 30, 2011. The press release reflected that the Company reserved $1.5 billion 

“related to ongoing settlement discussions in the previously disclosed investigation by the U.S. 

Department of Justice, through the U.S. Attorney for the Western District of Virginia, related to 

Depakote.” The press release also indicated that “[t]he discussions are ongoing, and until 

concluded, there can be no certainty about definitive resolution.” 

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83. Due to the off-label marketing of Depakote, Abbott has tentatively agreed to pay 

at least $1.3 billion to settle claims by the United States government and twenty-four states. The 

tentative agreement reached among Abbott executives, federal prosecutors, and state officials 

will require Abbott to pay approximately $800 million to resolve civil claims and approximately 

$500 million in criminal penalties. 

84. A settlement of $1.3 billion would be the third largest settlement for illegal 

pharmaceutical marketing in United States history, behind $2.3 billion and $1.4 billion as being 

the first and second largest, respectively. 

The Wrongful Conduct Reached – And Benefitted – The Highest Levels of the Company

85. According to the qui tam Amended Complaint, the illegal and wrongful actions 

alleged above were orchestrated and condoned by the highest levels of Abbott’s management, 

some of whom benefitted handsomely. The unlawful acts benefited top Abbott managers, as the 

Company’s revenue growth resulting from the illegal marketing schemes enabled the highest 

levels of Abbott management to obtain disproportionately large compensation packages, and 

boosting sales through off-label marketing directly translated, and continue to translate, into 

higher bonuses for Abbott’s top executives. 

86. As a result of the Company’s off-label marketing of Depakote, sales reached more 

than $1.4 billion per year. Between 2000 and 2009, sales of Depakote in the United States were 

at least $6.8 billion, and a substantial portion of these sales was the result of Abbott’s unlawful 

off-label marketing. 

87. Moreover, as off-label marketing increased, top executives’ compensation 

reached new heights. For example, according to proxy statements filed by the Company, former 

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CEO Burnham’s salary was $794,2694

 in 1994, $818,269 in 1995, $846,923 in 1996, $877,769 

in 1997, and $913,077 in 1998.5

 Burnham’s bonus was $800,000 for 1994, $1,000,000 for 1995, 

$1,055,000 for 1996, $1,175,000 for 1997, and $1,500,000 for 1998. His “other annual 

compensation” was $207,556 in 1994, $413,422 in 1995, $518,747 in 1996, $593,916 in 1997, 

and $819,205 in 1998. 

88. According to proxy statements filed by the Company, after White assumed the 

role of CEO in 1998, his salary was: $1,306,731 in 1999, $1,390,961 in 2000, $1,445,662 in 

2001, $1,497,388 in 2002, $1,564,961 in 2003, $1,551,846 in 2004, $1,605,990 in 2005, 

$1,661,973 in 2006, $1,726,936 in 2007, $1,807,500 in 2008, $1,852,319 in 2009, and 

$1,893,371 in 2010. 

89. White’s bonus was $800,000 for 1999, $1,800,000 for 2000, $2,100,000 for 2001, 

$1,250,000 for 2002, $1,750,000 for 2003, $2,700,000 for 2004, and $2,650,000 for 2005. He 

was awarded a Performance Incentive Plan (“PIP”) bonus of $4,050,000 for 2006, $4,050,000 

for 2007, $4,200,000 for 2008, $3,900,000 for 2009, and received a bonus of $3,700,000 for 

2010. 

90. White’s “other annual compensation” was $40,662 in 1999, $68,881 in 2000, 

$104,247 in 2001, $66,068 in 2002, $84,122 in 2003, 487,817 in 2004, and $439,387 in 2005. 

“All other compensation” for White was $855,233 in 2006, $1,048,661 in 2007, $850,893 in 

2008, $709,770 in 2009, and $807,728 in 2010. 

 

4

 These figures exclude long-term compensation, such as stock awards and option awards. 

5

 Burnham retired from the role of CEO at the end of 1998.

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91. According to the qui tam Amended Complaint, among other things, the Long 

Term Care division was created and/or maintained with the knowledge and consent of Abbott 

management, including an undisclosed member of management.6 

92. According to the qui tam Amended Complaint, Abbott upper level management 

attended Depakote sales training sessions but purposefully left the room when the off-label 

training sessions began, and while a sales representative was told by her managers that Abbott 

upper level management knew about off-label training sessions, they did not want to personally 

witness them. 

93. According to the qui tam Amended Complaint, management staff at Abbott’s 

corporate headquarters were fully aware of Depakote’s speaker programs and events that the 

Company underwrote financially. Abbott required Long Term Care/Special Accounts division 

representatives to secure advanced approval from Abbott headquarters for payments for the 

events and payments to physicians. 

94. Upon information and belief, the magnitude and duration of the wrongdoing, 

coupled with the Company’s billions of dollars of sales revenue attributable to sales of Depakote 

in the United States (a substantial portion of which were the result of off-label marketing) reflect 

the Director Defendants’ participation and/or approval of the wrongful conduct alleged herein, 

and/or reckless disregard of their fiduciary duties to exercise reasonable and prudent oversight 

and supervision over the management, policies, practices, and controls of the Company. 

95. Indeed, the Director Defendants’ sustained action and/or failure to act to protect 

the Company in the face of systematic violations of applicable law resulting from the off-label 

 

6

 The qui tam Amended Complaint was filed under seal pursuant to 31 U.S.C. § 3730(b)(2), and 

certain individuals’ names have been redacted from the public version, including this member of 

management. 

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marketing of Depakote has resulted in what is to be the third largest settlement for illegal 

pharmaceutical marketing in United States history. 

96. According to the Company’s most recent Definitive Proxy Statement filed on 

Form DEF 14A with the SEC on March 15, 2011: 

The board has risk oversight responsibility for Abbott and administers this 

responsibility both directly and with assistance from its committees. The board 

has determined that the current leadership structure, in which the offices of 

chairman and chief executive officer are held by one individual and an 

independent director acts as lead director, ensures the appropriate level of 

oversight, independence, and responsibility is applied to all board decisions, 

including risk oversight, and is in the best interests of Abbott and its shareholders. 

The chairman of the nominations and governance committee acts as the lead 

director to facilitate communication with the board and presides over regularly 

conducted executive sessions of the independent directors or sessions where the 

chairman of the board is not present. It is the role of the lead director to review 

and approve matters, such as agenda items, schedule sufficiency, and, where 

appropriate, information provided to other board members. The lead director is 

chosen by and from the independent members of the board of directors, and 

serves as the liaison between the chairman and the independent directors; 

however, all directors are encouraged to, and in fact do, consult with the chairman 

on each of the above topics as well. The lead director, and each of the other 

directors, communicates regularly with the chairman and chief executive officer 

regarding appropriate agenda topics and other board related matters. 

The Company’s previous proxy statements have similar explanations of the Board’s oversight 

responsibility. 

97. According to Abbott’s proxy statements, the Board met officially eight times in 

1998, ten times in 1999, six times in 2000, six times in 2001, eight times in 2002, eleven times in 

2003, eight times in 2004, eight times in 2005, thirteen times in 2006, seven times in 2007, nine 

times in 2008, seven times in 2009, and seven times in 2010. 

98. As a matter of corporate governance in connection with Board meetings, senior 

officers of Abbott and/or members of the Company’s committees prepared packages of relevant 

information concerning the business and financial position of the Company, including internal 

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audit reports that detailed the functions of critical departments of the Company, litigation reports 

detailing pending or possible litigation or regulatory actions concerning the Company. The 

Director Defendants, under existing principles of corporate law and governance, had the 

responsibility to ensure that Abbott had in place a reporting system that would enable them to 

determine if Abbott’s activities complied with applicable law and whether proper reports were 

being generated. 

99. Abbott currently has, and for substantially the duration of the relevant period had, 

five committees: the Public Policy Committee, Audit Committee, Executive Committee, 

Compensation Committee, and Nominations and Board Affairs Committee. 

100. According to the Company’s Public Policy Committee charter: 

Purpose. The Public Policy Committee of the Board of Directors shall assist the 

Board in fulfilling its oversight responsibility with respect to: public policy, 

regulatory (including regulation by the Federal Food and Drug Administration, 

as well as other domestic, foreign and international regulatory bodies) and 

government affairs and healthcare compliance issues that affect Abbott

(recognizing that other board committees assist the Board of Directors in 

reviewing certain areas of legal and regulatory compliance), by discharging the 

responsibilities set forth below. . . . 

Authority and Responsibilities. To assist it in the conduct of its responsibilities, 

the Public Policy Committee shall consult with management and, to the extent it 

deems it necessary or appropriate, may seek advice and assistance from Abbott 

employees or others, and may retain legal counsel and other advisors. 

The Public Policy Committee shall report to the Board on a regular basis. 

The Public Policy Committee may delegate any of its responsibilities and duties 

to one or more members of the Public Policy Committee. 

The Committee shall: 

• Review and evaluate Abbott’s policies and practices with respect to 

maintaining legal, regulatory and healthcare compliance (recognizing 

that other board committees assist the Board of Directors in reviewing 

certain areas of legal and regulatory compliance), and review them with 

the Board as appropriate. 

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• Devise a process for the dissemination of information to the Committee 

from management with respect to regulatory and healthcare compliance 

matters, including, as appropriate, presentations to the Committee from 

management concerning the state of regulatory compliance and all issues 

with respect thereto. 

• The Chief Ethics and Compliance Officer shall report to the Public Policy 

Committee on an as needed basis on any significant compliance issues. 

• Review and evaluate Abbott’s policies and practices with respect to social 

responsibility, and review them with the Board as appropriate. 

• Review social, political, economic and environmental trends and public 

policy issues that affect or could affect Abbott’s business activities, 

performance, and public image, and review them with the Board as 

appropriate. 

• Review and make recommendations to the Board regarding shareholder 

proposals submitted for inclusion in Abbott’s proxy materials that relate to 

public policy or social responsibility issues. 

(Emphasis added). 

101. According to the Company’s proxy statements, the Public Policy Committee—

which was created in October 1999, includes certain of the Director Defendants, and was 

charged with assisting the Board in fulfilling its oversight responsibility with respect to, among 

other things, legal, regulatory, and healthcare compliance (including regulation by the FDA)—

officially met three times in 2000, three times in 2001, three times in 2002, two times in 2003, 

two times in 2004, two times in 2005, one time in 2006, two times in 2007, once in 2008, two 

times in 2009, and once in 2010. 

102. Moreover, according to Abbott’s Audit Committee charter: 

Purpose. The Audit Committee of the Board of Directors shall assist the Board in 

fulfilling its oversight responsibility with respect to: 

• Abbott’s accounting and financial reporting practices and the audit 

process; 

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• the quality and integrity of Abbott’s financial statements; 

• the independent auditors’ qualifications, independence, and performance; 

• the performance of Abbott’s internal audit function and internal auditors; 

• legal and regulatory compliance as it relates to financial matters, including 

accounting, auditing, financial reporting, and securities law issues 

(recognizing that other board committees assist the Board of Directors in 

reviewing other areas of legal and regulatory compliance); and 

• Abbott’s enterprise risk management, including major financial risk 

exposures (recognizing that other board committees assist the Board of 

Directors in reviewing certain aspects of risk management); 

and shall prepare the report required by the rules of the Securities and Exchange 

Commission to be included in Abbott’s annual proxy statement. . . . 

(Emphasis added). Among other things, the Audit Committee was required to: 

Review and discuss (with management, the internal auditors and the independent 

auditors, as appropriate) Abbott’s enterprise risk management, including major 

financial risk exposures, and the steps management has taken to monitor and 

control those exposures, including Abbott’s risk assessment and risk management 

policies. 

103. The Audit Committee, which includes certain of the Director Defendants and 

assists the Board in fulfilling its oversight responsibilities and with certain areas of legal and 

regulatory compliance, met officially two times in 1998, two times in 1999, three times in 2000, 

four times in 2001, seven times in 2002, seven times in 2003, seven times in 2005, seven times in 

2006, six times in 2007, seven times in 2008, seven times in 2009, and seven times in 2010. 

104. Moreover, Abbott’s Executive Committee, which may exercise all the authority of 

the Board in the management of Abbott, except for matters expressly reserved by law for Board 

action, met once in 2003, three times in 2006, once in 2008, and three times in 2010. 

105. The Company’s Compensation Committee, which assists the Board in carrying 

out its responsibilities relating to the compensation of Abbott’s executive officers and directors, 

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met officially three times in 1998, two times in 1999, two times in 2000, two times in 2001, three 

times in 2002, four times in 2003, eight times in 2004, two times in 2005, three times in 2006, 

three times in 2007, four times in 2008, three times in 2009, and five times in 2010. 

106. The Nominations and Board Affairs Committee—which assists the Board in 

identifying individuals qualified to become Board members and recommends to the Board the 

nominees for election as directors at the next annual meeting of shareholders, recommends to the 

Board the persons to be elected as executive officers of Abbott, develops and recommends to the 

Board the corporate governance guidelines applicable to Abbott, and serves in an advisory 

capacity to the Board and the Chairman of the Board on matters of organization, management 

succession plans, major changes in the organizational structure of Abbott, and the conduct of 

Board activities—officially met three times in 1998, two times in 1999, two times in 2000, two 

times in 2001, three times in 2002, two times in 2003, two times in 2004, four times in 2005, six 

times in 2006, two times in 2007, three times in 2008, two times in 2009, and twice in 2010. 

107. The Director Defendants (for the years in which they were directors) signed 

Abbott’s Forms 10-K filed with the SEC each year during the relevant period and, in so doing, 

were required to assure themselves, through their due diligence of the matters discussed therein 

and of Abbott’s business, operations, and finances, that the Forms 10-K filed with the SEC were 

accurate. Through this process the Director Defendants were required to make themselves aware 

of Abbott’s regulatory status and exposure, including the continuing practices of off-label 

marketing of Depakote. For example, the Company’s most recent Form 10-K, filed on February 

18, 2011, discusses the following items, each of which the Director Defendants who were 

directors at that time, by signing the Form 10-K, presumably investigated to assure themselves 

that the descriptions were accurate: 

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Regulation: The development, manufacture, sale, and distribution of Abbott’s 

products are subject to comprehensive government regulation. Government 

regulation by various federal, state, and local agencies, both domestic and 

international, which includes detailed inspection of, and controls over, research 

and laboratory procedures, clinical investigations, product approvals and 

manufacturing, marketing and promotion, sampling, distribution, record keeping, 

storage, and disposal practices, and achieving compliance with these regulations, 

substantially increases the time, difficulty, and costs incurred in obtaining and 

maintaining the approval to market newly developed and existing products. 

Government regulatory actions can result in delay in the release of products, 

seizure or recall of products, suspension or revocation of the authority necessary 

for their production and sale, and other civil or criminal sanctions, including 

fines and penalties. . . . 

Abbott’s products are subject to rigorous regulation by the U.S. Food and Drug 

Administration, and numerous international, supranational, federal, and state 

authorities. . . . 

Abbott’s industry is also subject to various federal, state, and international laws 

and regulations pertaining to government benefit program reimbursement, 

price reporting and regulation, and health care fraud and abuse, including 

anti-kickback and false claims laws, the Medicaid Rebate Statute, the Veterans 

Health Care Act, and individual state laws relating to pricing and sales and 

marketing practices. Violations of these laws may be punishable by criminal 

and/or civil sanctions, including, in some instances, substantial fines, 

imprisonment, and exclusion from participation in federal and state health care 

programs, including Medicare, Medicaid, and Veterans Administration health 

programs. These laws and regulations are broad in scope and they are subject to 

evolving interpretations, which could require Abbott to incur substantial costs 

associated with compliance or to alter one or more of its sales or marketing 

practices. In addition, violations of these laws, or allegations of such violations, 

could disrupt Abbott’s business and result in a material adverse effect on Abbott’s 

revenues, profitability, and financial condition. 

(Emphasis added). This Form 10-K was signed White, Alpern, Austin, Farrell, Fuller, Liddy, 

Novakovic, Osborn, Owen, Roberts, Scott, Smithburg, and Tilton, as well as Executive Vice 

President, Finance and Chief Financial Officer Thomas C. Freyman, and Vice President and 

Controller Greg W. Linder. 

108. Additional Forms 10-K filed during the relevant period contain paragraphs similar 

to those above, and were signed by the Director Defendants who served at the time. 

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DERIVATIVE ALLEGATIONS

109. Plaintiff incorporates by reference all preceding and subsequent paragraphs as if 

set forth fully herein. 

110. Plaintiff brings this action derivatively in the right and for the benefit of the 

Company to redress injuries suffered and to be suffered by the Company because of the breaches 

of fiduciary duties by the Director Defendants. 

111. Plaintiff will adequately and fairly represent the interests of the Company and its 

shareholders in enforcing and prosecuting its rights, and has retained counsel experienced in 

litigating actions of this type. 

112. Plaintiff is an owner of Abbott shares and was an owner of Abbott stock during 

all times relevant to the Director Defendants’ wrongful conduct as alleged herein. 

DEMAND IS EXCUSED

113. Plaintiff incorporates by reference all preceding and subsequent paragraphs as if 

set forth fully herein. 

114. Abbott is incorporated in Illinois, and, thus, Illinois corporation law governs the 

issue of whether Plaintiff was required to make a demand on the Company’s Board to institute 

this case before filing this Complaint. Making a demand is considered futile under Illinois law if 

particularized facts raise a reasonable doubt that either (1) the directors are disinterested or 

independent, or (2) the challenged transaction was the product of a valid exercise of the 

directors’ business judgment. 

115. Plaintiff has not made any demand on the Abbott Board to institute an action 

against itself for their breaches of fiduciary duties as alleged herein because such demand would 

be a futile and useless act for the following reasons: 

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(a) The facts detailed above demonstrate and are the basis for the allegations 

that the Director Defendants: caused and/or allowed Abbott to knowingly engage in repeated and 

persistent violations of federal regulations in connection with the off-label marketing of 

Depakote; knew that the failure to comply with regulations would result in severe penalties; and 

chose not to bring a prompt halt to the improper conduct causing the non-compliance, reprimand 

those persons involved, or seek to redress Abbott for the serious damages it has and will sustain; 

(b) The magnitude and duration of the wrongdoing, as alleged herein, and the 

magnitude of the proposed $1.3 billion settlement, reflect a lack of good faith on the part of the 

Director Defendants; and 

(c) The Board, by its actions and inactions, knowingly breached its fiduciary 

duties to Abbott and its shareholders. 

116. Demand is also excused as futile because the facts pled herein raise a reasonable 

doubt that a majority of the Board is independent and disinterested. Upon information and 

belief, a majority of the Board members who would have reviewed the demand were directors 

who had been Board members during a portion and/or all of the period in question, and, thus, 

face a substantial likelihood of liability for deliberately and consciously failing to comply with 

their fiduciary duties. 

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COUNT I

BREACH OF FIDUCIARY DUTIES AGAINST THE DIRECTOR DEFENDANTS

117. Plaintiff incorporates by reference all preceding and subsequent paragraphs as if 

set forth fully herein. 

118. Each of the Director Defendants, because of his or her positions as directors 

and/or officers of Abbott, owed fiduciary duties to the Company and its shareholders in 

connection with the management and operations of the Company’s business and operations. 

119. To properly discharge these duties, the Director Defendants were required to, 

among other things: 

a. manage, conduct, supervise, and direct the business affairs of Abbott in 

accordance with best practices, and applicable state and federal laws, rules, and regulations; 

b. neither violate nor permit any officer, director, agent, or employee of 

Abbott to violate applicable state and federal laws, rules, or regulations; and 

c. remain informed as to the status of Abbott’s business practices and 

operations and upon receipt of notice of information of imprudent or unsound practices or 

operations, make a reasonable inquiry in connection therewith, and take steps to correct such 

practices or operations. 

120. Moreover, each of the Director Defendants had a duty to Abbott and its 

shareholders to establish and maintain adequate internal controls to ensure that the Company was 

operated in a prudent and lawful manner. The Director Defendants had an affirmative obligation 

to install an internal control system to discover wrongdoing. Additionally, where red flags exist, 

the Director Defendants have an obligation to take affirmative steps to address such issues. 

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121. As detailed herein, the Director Defendants caused and/or allowed the Company 

to violate federal regulations and/or failed to properly and adequately maintain a system of 

internal controls adequate to insure the Company’s compliance with, among other things, federal 

regulations, in violation of their fiduciary duties. The Director Defendants instituted a corporate 

culture that encouraged unlawful and irresponsible activity resulting in the likely loss of $1.3 

billion or more. 

122. As a result of the Director Defendants’ wrongful conduct and actions, Abbott has 

suffered and will continue to suffer significant damage. 

123. All of the Director Defendants, individually and in concert, engaged in the 

aforementioned conduct in intentional breach and/or reckless disregard of their fiduciary duties 

to the Company and conspired to, and did, abuse the control vested in them by virtue of their 

high-level positions in the Company. 

124. As a direct and proximate result of the Director Defendants’ failure to perform 

their fiduciary obligations, Abbott engaged in unlawful activities causing damage to the 

Company. 

PRAYER FOR RELIEF

 WHEREFORE, Plaintiff prays for relief and judgment as follows: 

A. Authorizing the maintenance of this action as a derivative action, with Plaintiff as 

derivative plaintiff; 

B. Declaring that the Director Defendants have violated their fiduciary duties to the 

Company; 

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37

C. Awarding against all of the Director Defendants and in favor of the Company the 

amount of damages sustained by the Company as a result of the Director Defendants’ breaches 

of fiduciary duties; 

D. Awarding to Plaintiff the costs and disbursements of the action, including 

reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses; and 

E. Granting such other and further relief as the Court deems just and proper. 

JURY DEMAND

 Plaintiff demands trial by jury on all claims asserted herein. 

Dated: November 8, 2011 

By:

KRISLOV & ASSOCIATES, LTD. 

/S/ Clint Krislov 

Clinton A Krislov 

Civic Opera Building, Suite 1350 

20 North Wacker Drive 

Chicago, IL 60606 

Tel.: (312) 606-0500 

Fax: (312) 606-0207 

 

RIGRODSKY & LONG, P.A. 

Seth D. Rigrodsky 

Brian D. Long 

Gina M. Serra 

919 N. Market Street, Suite 980 

Wilmington, DE 19801 

Tel.: (302) 295-5310 

Fax: (302) 654-7530 

Attorneys for Plaintiff

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