New York State Comptroller Thomas P. DiNapoli, as sole trustee of the New York State Common Retirement Fund, Albany, has sued the gene-sequencing company Illumina for a bungled acquisition that violated European Commission law, provoked opposition by the Federal Trade Commission, led to the departure of two chairmen and one CEO, and caused a collapse of the company’s stock.
The Illumina transaction has become a magnet for lawsuits. The company’s latest 10-Q statement, for the three months ended June 30, contains five pages of litigation and regulatory actions.
The SEC document was filed before DiNapoli’s Aug. 23 lawsuit in Delaware Chancery Court, where Illumina is incorporated, seeking to “recover the unnecessary costs borne by Illumina, including hundreds of millions of dollars in fines and legal bills and the billions in damages Illumina suffered.”
Aside from Illumina, the defendants include current and former officers and directors who caused “legal chaos,” said the lawsuit DiNapoli vs. Illumina Inc. et al., which is seeking payment for damages to the company and to its shareholders.
“The defendants placed their self-interest above the interests of Illumina and shifted the risk of their misconduct to the Illumina stockholders,” the lawsuit said.
The $267.7 billion New York State Common Retirement Fund holds $12 million in Illumina common stock, according to the latest available data.
The lawsuit focuses on Illumina’s acquisition of GRAIL, which conducts research on early detection of cancers. On Aug. 16, 2021, two days before the acquisition closed, Illumina’s stock reached a high of $524.84 per share, the lawsuit said. Four years later, the stock had dropped by more than 75% to $128.80 on Aug. 15, 2024.
GRAIL was once a division of Illumina that was spun off as a separate company. Later, Illumina bought back GRAIL for $8 billion.
Illumina’s action defied the European Commission’s standstill regulation that prevents completing a merger when the companies are under review by the EC.
Two days after the deal closed, the EC warned Illumina, on Aug. 20, 2021, that it faced a stiff fine for violating the standstill order, the lawsuit said. On Sept. 6, 2022, the EC prohibited the transaction, the lawsuit said.
The Federal Trade Commission also warned about the merger, and on March 31, 2023, it ruled that deal had violated U.S. antitrust law, the lawsuit said. A few months later, the EC fined Illumina $476 million for violating the standstill rule, the lawsuit said.
Illumina fought the FTC in court, but it lost. On Dec. 15, 2023, the 5th U.S. Circuit of Appeals, New Orleans, supported the FTC’s claim that the merger was anti-competitive. On June 24, 2024, Illumina divested GRAIL, distributing 85.5% of GRAIL shares to stockholders, the lawsuit said.
The continuing legal carnage is described in the company’s latest 10-Q, which identified an SEC inquiry letter filed in July 2023 requesting documents and communications relating to the GRAIL deal; lawsuits filed by two municipal pension funds alleging breaches of fiduciary duty, which remain pending; and lawsuits by two groups of stockholders that were subsequently voluntarily dismissed.
The 10-Q also described GRAIL-related lawsuits by two groups of plaintiffs in California, alleging state securities law violations, which remain pending; federal securities violations lawsuits by three group of plaintiffs; the combining of these three lawsuits with three other securities violations lawsuits into a consolidated lawsuit. The consolidated action remains pending.
“The director defendants consciously and in bad faith failed to discharge their fiduciary responsibilities,” DiNapoli’s lawsuit said. “The facts show that the board ignored red flags that were clearly visible, including the plain language” in the EC standstill regulation.
“The multiple board meetings and multiple reports by counsel, showing that the board conditioned their approval of the GRAIL acquisition on Illumina paying for $300 million in D&O insurance … create a fair inference that the board was well aware of these red flags,” said the lawsuit, referring to directors and officers insurance.
An Illumina representative did not respond to a request for comment.
