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J&J, Shareholders Reach Tentative Deal In Lawsuit

Stocks in this article: JNJ MDCO

LINDA A. JOHNSON

TRENTON, N.J. (AP) â¿¿ Lawyers for Johnson & Johnson shareholders suing management for not fixing serious problems for yearsâ¿¿ from shoddy manufacturing to paying kickbacks to boost sales â¿¿ have reached a tentative settlement meant to restore high standards at the health care giant.

The deal calls for big changes to protect both investors and patients using J&J products, including establishing a new committee of independent board members that will get reports about legal and quality problems directly from key executives so they can be addressed quickly and fully.

The plaintiffs, institutional and individual investors, state Johnson & Johnson's decentralized management was a "recipe for disaster" that gave top executives and board members "plausible deniability" to claim they were unaware of a range of severe problems that dragged on, some since the late 1990s, and tarnished the company's once-stellar reputation.

Those included kickbacks paid to doctors and pharmacists to boost product sales, marketing of drugs for unapproved uses and dozens of recalls due to manufacturing deficiencies, including wrong levels of active ingredients in medicines, glass and metal shards in liquid medicines and nauseating packaging odors.

In a statement Thursday, Johnson & Johnson said it "continues to deny the claims in the plaintiffs' lawsuit."

The company, based in New Brunswick, N.J., added that it is "entering into the settlement to undertake the changes in corporate governance to benefit J&J and its shareholders, and to eliminate the burden, distraction, and expense of further litigation."

The plaintiffs are suing 10 members who were on J&J's board when the case started in 2010, as well as several current or former executives. Those include the current CEO, Alex Gorsky, and predecessor Bill Weldon, who stepped down in April after a decade in the post but remains board chairman.

The proposed settlement requires the full board to adopt new quality and compliance goals that the company follow laws and regulations in its operations and deliver high-quality products. All of J&J's 120,000 employees worldwide, up to senior management, are to be evaluated and have their compensation decided according to how well they adhere to the goals.

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