Hollis-Eden Namesake Fired 'For Cause'

Hollis-Eden Pharmaceuticals'(HEPH Quote) founder and Chief Executive Richard Hollis was fired "for cause" by his board last week, triggering a clause in his employment contract that strips him of millions of dollars in severance payments.

Hollis's termination as CEO of the San Diego-based drug company that bears his name was effective March 18 but disclosed publicly Monday night in a filing with the Securities and Exchange Commission.

The departure of a drug or biotech company CEO is a fairly common event, especially in the current troubled economic environment. Yet, these management changes are typically performed with a certain amount of public discretion that allows the executive to depart with his reputation intact and his financial nest egg bolstered with a generous severance package.

Last week's firing of Hollis, however, wasn't very demure. The 8-K filing Monday states that a special committee of Hollis-Eden's board, made up of non-employee directors, terminated Hollis "pursuant to Section 4.3 of his employment agreement."

Monday's disclosure doesn't include any details about Section 4.3 of Hollis's employment agreement, but a quick search through SEC filings reveals that this particular section of Hollis's contract defines various conditions under which he could be fired "for cause."

These conditions include being in material breach of his employment contract; participating in any activity or engaging in behavior that is competitive or injurious to the company; committing fraud against the company; stealing company funds or property for his personal use; or conviction of "any crime involving dishonesty or moral turpitude," according to Hollis's employment agreement that is included in the company's proxy statements filed with the SEC.