File this under ‘if something can go wrong, it will.’ KV Pharmaceutical was tagged last year by the FDA for making and selling unadulterated and unapproved drugs (see here). Since then, manufacturing has been idle for 15 months, KV is short of cash, and 289 people - or about three-quarters of its workforce - was just let go.

Meanwhile, David Hermelin, a former vp of corporate strategy and operations, filed a charge of religious discrimination against KV last September. KV denies his dismissal was tied to religion. Hermelin is the son of Marc Hermelin, KV’s former chairman and ceo, who was dismissed in December 2008 amid a probe into alleged mismanagement, The St. Louis Business Journal writes. However, Marc Hermelin claims he retired from his position prior to his termination by the board. At stake in the dispute is $10.8 million in accrued retirement benefits. Both David Hermelin and Marc Hermelin are still members of KV’s board, because they hold 62 percent of the voting power of two classes of common stock.

And last month, a wholly owned subsidiary known as Ethex pleaded guilty to two felony counts of criminal fraud for failing to report to the FDA that it was making oversize tablets that could be harmful to patients, The St. Louis Post-Dispatch notes. A KV exec considered what to do in July 2008 after KV discovered oversize tablets and oOne option was “to do nothing because the probability of oversized tablets is very low,” Assistant US Attorney Andrew Lay said in court papers. Over the objections of other employees, the executive chose the “do-nothing option.” The unnamed exec instructed multiple employees to “minimize written communications about KV’s oversized tablet manufacturing problems and limit distribution and discussion of any documents discussing these problems,” according to the prosecutor.

“Bottom line is you just don’t mess with the FDA, and this has happened again and again at KV,” Juli Niemann, an analyst at Smith, Moore & Co., tells the Post-Dispatch. “Trying to take shortcuts for profitability is a systemic problem there.” Adds Lawrence Solow, an analyst at CJS Securities: “It’s a disaster.”

“It’s a disaster,” said Lawrence Solow, an analyst at CJS Securities, a New York brokerage and research firm. “If within six months they don’t start generating revenues, they may end up in bankruptcy.”