We’ve been meaning to tell you this…

October 31, 2005

Memory is such an inconvenient thing. Take Medicis Pharmaceutical (MDX) for example. On Friday, they disclosed that one of their board members, who had a consulting contract dating back to 1997, no longer has that consulting contract. But as with many disclosures, this one leads to several other questions, such as why the company failed to mention the consulting contract — which paid director Michael Pietrangelo $3,333 a month for a “minimum of four hours a month” plus covered $1,000 a month in health benefits — at any point in the past. Or why it took a bunch of seemingly accomplished people nearly a year to realize that the agreement violated rules on director independence.

A quick skim of Medicis’ past proxies provides extensive information of Pietrangelo’s impressive background, including a stint nearly 40 years ago at Pfizer (PFE), but somehow repeatedly failed to mention the long-standing consulting contract.

Particularly problematic was that Pietrangelo was on the company’s audit committee, where up until recently, the company viewed him as an independent director, despite clearly written rules that say otherwise. Indeed, as the company noted in Friday’s filing, it just notified the NYSE on Oct. 20 that its audit committee did not meet NYSE requirements on independence for nearly a year. But that was done two weeks after Pietrangelo resigned from the audit committee. Oops.

Though I give Medicis credit for finally coming clean to its investors, it’s a bit scary when a corporate attorney — Pietrangelo’s day job — and the company that he serves both seem to have forgotten about the much-publicized director independence rule and that it took nearly a year to fix the problem. It just makes you wonder how many other companies have had their own memory lapses.

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