Story
Amgen to Pay $74 Million to Settle Lawsuit Over Undisclosed $10.7 Billion IRS Tax Dispute
Summary
The biotechnology firm has reached a preliminary agreement to resolve a class-action lawsuit alleging it failed to timely inform investors about a major tax dispute with the IRS concerning profit-shifting to Puerto Rico.
Amgen Inc. has agreed to a $74 million settlement to resolve a class-action lawsuit from shareholders who accused the company of concealing a potential $10.7 billion tax liability from the Internal Revenue Service (IRS). The preliminary settlement, which requires judicial approval, was disclosed in a Manhattan federal court filing.
Settlement Details
The agreement aims to conclude litigation brought by shareholders, led by the Asbestos Workers Philadelphia Pension Fund, who purchased Amgen stock between July 29, 2020, and April 27, 2022. According to a Reuters report, Amgen denied any wrongdoing in the settlement filing and stated on Tuesday that it believes the shareholders' claims lack merit.
This settlement resolves allegations related to the timing and extent of the company's disclosures to investors. It does not settle the underlying tax dispute with the IRS, which remains ongoing.
The Core Tax Dispute
The central issue stems from an IRS accusation that Amgen underpaid its taxes from 2010 to 2015. The agency claims the company improperly allocated profits to a subsidiary in Puerto Rico, a common strategy known as transfer pricing used to lower corporate tax bills.
The IRS is seeking a total of approximately $10.7 billion, which includes:
Ad- $8.7 billion in back taxes and interest.
- $2 billion in penalties.
Amgen has disclosed that a decision in its case with the U.S. Tax Court could be delivered this year.
Market Impact and Allegations
Shareholders alleged in their lawsuit that Amgen's delayed disclosures about the scale of its tax risk caused significant, and avoidable, losses. They pointed to two specific dates when the company's share price fell sharply following new information about the tax dispute.
The lawsuit claimed that Amgen's stock price declined 6.5% on August 4, 2021, and another 4.3% on April 28, 2022, as the market reacted to the company's updated disclosures regarding its potential tax liabilities.
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