Lawsuit Vs. Mannkind Dismissed Print E-mail
By Vinny Cassano   
Monday, 29 November 2010 15:22

best penny stock picksMannkind Corp filed an 8k last week announcing that John Arditi - a former employee who had filed a lawsuit alleging fraud, cover-up and wrongful termination against the company - had voluntarily dismissed his lawsuit without prejudice.

According to the 8k filing, Mannkind provided Mr. Arditi no financial compensation or cosideration of any kind in relation to the dropping of the suit, although the document did reference an existing agreement stating that Mr. Arditi was bound to resolve his claims of termination through arbitration.

The charges filed by Mr. Arditi are serious, alleging the cover-up of Afrezza data by officials of Mannkind in an attempt to mislead the FDA and gain ultimate approval, and the MNKD stock was hit hard when the news of the lawsuit hit the wires.

The company originally responded to the suit by stating that an independant investigation had taken place when Mr. Arditi first brought the allegations to light and found no wrongdoing. The voluntary dismissal of the lawsuit does not mean that this story is over, however, but it does mean that Mannkind keeps it from the spotlight - if it does hold true that Mr. Arditi is required to settle any employment issues through arbitration as it looks now.

If there is any truth to Mr. Arditi's claims - and it's hard to imagine that an educated man would completely falsify a lawsuit of this magnitude - then the facts will eventually come to light, arbitration agreement or not. That's something the lawyers will have to figure out.

On the other hand, maybe Arditi may have made the mistake of thinking he was bigger than the company, in which case he could end up in a world of hurt. Speculation will rule the short term future for Mannkind shareholders as to what is really going on behind the scenes, but in the meantime Afrezza has a date with destiny and the FDA later next month, and the short term future of the company and its stock relies more on the outcome of the FDA review than it does on John Arditi.

While we're speculating, here's my opinion: Arditi needs to sever his ties (if possible) to the arbitration agreement before he can bring this up in court. The lawyers on both sides will work this one out and the process will probably take long enough to allow Mannkind to get through the FDA review process without having to deal with Arditi, but I don't think for a second that we've heard the end of this.

Regardless of who comes out on top, the guilty party should be held accountable; this is serious stuff.

Stay tuned, but don't be so preoccupied as to lose sight of the late December Afrezza decision - that's the real pending news for Mannkind and its shareholders.

Disclosure: No positions.

Vinny also authors the popular stock investing blog VFC's Stock House.

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