Amgen Faces Class Action Lawsuit for IRS Tax Underreporting: What Investors Need to Know
By Jonathan Stempel
NEW YORK (Multibagger) - A significant legal battle is unfolding for biotech giant Amgen (NASDAQ: AMGN), as the company faces a proposed class action lawsuit alleging it delayed informing shareholders about a potential $10.7 billion tax liability. This development could have substantial implications for current and future investors.
Key Points of the Lawsuit
- Federal Judge's Ruling: U.S. District Judge John Cronan in Manhattan has ruled that shareholders have presented a plausible case, accusing Amgen of "recklessly" concealing its substantial tax liability.
- Allegations: The lawsuit claims that Amgen underreported taxes from 2010 to 2015 by attributing U.S. taxable income to a Puerto Rico unit. Although Puerto Rico is a U.S. territory, it is considered a foreign country for corporate tax purposes.
- Share Price Impact: The delayed disclosure of these tax risks led to a significant drop in Amgen's share price—6.5% on August 4, 2021, and 4.3% on April 28, 2022.
- Judge's Analogy: Judge Cronan compared Amgen’s disclosure to "a child telling his parents that he had 'dessert' when in fact he had eaten the 'whole cake,'" emphasizing the misleading nature of the company's communication.
Amgen's Position
- Defense Argument: Amgen has argued that it did not hide the IRS’s stance and had warned about the agency’s increasing scrutiny over income and expense allocations among tax jurisdictions.
- Ongoing Litigation: Despite the ongoing legal proceedings, Amgen maintains that the IRS case lacks merit. A trial is set for November 4, 2023.
Financial Implications
- Potential Payout: The potential $10.7 billion payout equates to one-sixth of Amgen's assets and exceeds its available cash, raising concerns about the company's financial stability.
- Investor Concerns: The lawsuit has heightened investor concerns about Amgen's transparency and governance, which could impact its stock performance and investor confidence.
Breaking It Down: What This Means for You
For Everyday Investors:
- Understand the Risk: If you're invested in Amgen or considering it, be aware that this lawsuit could significantly affect the company’s financial health and stock price.
- Monitor Developments: Keep an eye on the trial scheduled for November 4, 2023, and any further disclosures from Amgen.
- Diversify Your Portfolio: To mitigate risk, ensure your investment portfolio is diversified across different sectors and asset types.
For the Financially Uninformed:
- What Happened: Amgen may owe a lot of money in taxes because they didn't report their income correctly. This is like telling your parents you only had one cookie when you ate the whole jar.
- Why It Matters: If Amgen has to pay this money, it could hurt the company's finances, which means their stock price might go down.
- What You Should Do: If you own Amgen stock or are thinking about buying it, be cautious. This lawsuit could make the stock less valuable.
By staying informed and understanding the potential financial impact, you can make better investment decisions and protect your financial future.