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Univ. of Toledo College of Law

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Wednesday, February 4, 2009

Former Biovail CEO Settles 13(d) Charges

The SEC announced that the United States District Court has entered a stipulated judgment against Eugene Melnyk, Biovail Corporation's former chairman and chief executive officer, with respect to violations of the stock accumulation disclosure provisions of the federal securities laws alleged by the Commission in a civil enforcement action filed in March 2008. The Commission's securities fraud charges against Melnyk in that action remain pending.

The Commission's complaint alleges, among other things, that Melnyk violated the stock accumulation disclosure provisions by failing to include in his Schedule 13D filings Biovail shares held in several off-shore trusts that Melnyk controlled. The complaint further alleges that, because Melnyk exercised both investment and trading authority over the shares in the trusts, Melnyk was a beneficial owner of the securities and was required to disclose the trust holdings in his Schedule 13D filings with the Commission.

The Commission's complaint also alleges that Melnyk, other senior Biovail executives, and Biovail violated the antifraud and other provisions of the securities laws. Biovail previously settled with the Commission by consenting to a judgment that, among other things, permanently enjoined it from violating antifraud and other provisions of the federal securities laws, imposed a $10 million civil penalty, and ordered it to pay disgorgement of $1. The Commission's allegations of violations of the antifraud and other provisions of the federal securities laws remain pending against Melnyk and three other former Biovail executives: former chief financial officer Brian Crombie; former controller John Miszuk; and former chief financial officer Kenneth G. Howling.

The stipulated judgment against Melnyk permanently enjoins him from future violations of Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 and imposes a civil penalty in the amount of $1,000,001. It states explicitly that the securities fraud charges against Melnyk remain pending and are not resolved by the stipulated judgment announced today.

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