Just before the holiday break, an interesting lawsuit was filed charging Johnson & Johnson board members and high-ranking execs with malfeasance, incompetency and indifference to patients and shareholders. And the 111-page complaint reads like an indictment as it delves into off-label marketing of prescription drugs, kickback schemes and manufacturing failures that led to those infamous product recalls of tens of millions of over-the-counter meds and surgical devices.

In short, the lawsuit pulls no punches. One section of the complaint carries this heading: ‘J&J Suffers Fundamental Control Breakdowns Across All of its Business Segments Over the Better Part of the Past Decade.’ The lawsuit opens by arguing J&J officials displayed “utter disregard for their fiduciary duties, including permitting and fostering a culture of systemic, calculated and widespread legal violations (that) has destroyed J&J’s hard-earned reputation.”

For those familiar with the sad litany of problems (see here, here, here and here), this may not come as shocking news. On the other hand, there are some eye-catching details that go beyond summarizing documents from government settlements and whistleblowers lawsuits.

For instance, page 26 mentions a confidential witness, a former quality and engineering manager at the Fort Washington, Pa., facility, which is now closed as J&J scrambles to retool. This witness, who was interviewed by the lawyers filing suit, describes an August 2007 report prepared for senior management based on an internal assessment and was provided to, among others, Colleen Goggins, the soon-to-retire (see this) chairman of J&J’s Consumer Group and a member of the executive committee. “Despite this report, which detailed widespread manufacturing problems at the plant going back as early as 2005, no action was taken,” the lawsuit states. And two witnesses claim that “cost concerns drove the decision not only to continue manufacturing operations unabated despite the identified risks, but also to continue to distribute known contaminated products.” The report has not been released publicly.

Another witness, who describes the Risperdal off-marketing imbroglio, points out that reps were directed by senior J&J managers, who showed slides at national sales meetings, to market schizophrenia med for such unapproved uses as dementia and Alzheimer’s disease to the elderly. An allegedly significant assertion is that this witness contends J&J ceo Bill Weldon “saw the dementia sales figures as a break-out from total Risperdal sales figures because that source of sales revenue was a very significant contributor to total Risperdal sales” and that “any expansion of Risperdal sales
into a new target market required approval from J&J’s executive committee, on which all of the division presidents sat.” Who chaired the committee? Bill Weldon.

There is much to read, but there is one more interesting point. This particular complaint is a derivative shareholder lawsuit on behalf of a corporation against an insider - in case, the J&J directors and execs. And the key attorney was also the point person on the legal team that recently brought Pfizer to its knees with a similar lawsuit that was recently settled.

That deal calls for Pfizer to create a $75 million fund that will be overseen by a new compliance committee comprised of board members who will monitor corporate governance. This requirement was not specified in a corporate integrity agreement Pfizer signed in 2009 as part of a $2.3 billion settlement with the federal government (back story). In other words, Pfizer directors are now on the hook for all sorts of bad behavior and this development, our sources say, played a role in the recent unexpected departure of former Pfizer ceo Jeff Kindler.

Weldon may be nearing retirement, but one can imagine that the J&J board would like to avoid a similar liability. Now, though, J&J directors may find themselves perenially on the hot seat, assuming this lawsuit succeeds. Such an outcome may be of small comfort to the employees, shareholders and patients who have lost jobs, money or better health in recent years, but perhaps the health care giant will be less likely to repeat the mistakes of the past (you can read the entire lawsuit here).