Amgen’s motion for dismissal was denied after a New York judge agreed the company did not sufficiently disclose to shareholders back taxes and penalties owed to the Internal Revenue Service.
A New York judge on Tuesday denied Amgen’s motion to dismiss a class action lawsuit that claims it owed around $10.7 billion in back taxes and hid it from investors, according to Reuters.
District Judge John Cronan in his ruling agreed that Amgen’s shareholders were “left in the dark” about the degree of the company’s tax liability. Amgen was not sufficiently forthcoming with shareholders, according to Cronan, who noted that the disclosers were like “a child telling his parents that had ‘dessert’ when in fact he had eaten the ‘whole cake,” Reuters reported.
“This court does not believe that analogy would have come out differently if the child described his treat as merely ‘significant’ or ‘substantial,’” Cronan wrote in his decision. A trial is currently scheduled for Nov. 4, 2024, according to Amgen’s second quarter earnings report.
Tuesday’s ruling comes after shareholders sued Amgen in March 2023, alleging that the company misled its investors by delaying the disclosure of its unpaid taxes and penalties with the IRS, which amounted to $10.7 billion. Roofers local No. 149 Pension Fund, which filed the legal complaint, also alleged that investors lost millions of dollars when Amgen’s share price saw substantial drops once the IRS notices came out, according to Reuters.
The case, proposed as a class action lawsuit and filed in the U.S. District Court for the Southern District of New York, also names CEO Robert Bradway and CFO Peter Griffith as defendants.
Amgen and the IRS have been locked in a tax dispute for years. In April 2022, Reuters reported that the IRS was seeking $5.1 billion in back taxes, plus interest and other penalties, for the company’s profits from 2013 to 2015. The tax discrepancies are related to Amgen’s taxable income that it has been attributing to a manufacturing unit in Puerto Rico, but which the IRS argues should be taxable in the U.S. The IRS contends that Amgen has underreported its tax from 2010 to 2015.
However, Amgen has consistently challenged the the tax claims. In its first-quarter 2022 earnings call, Griffith contested the tax claims and called the penalties “wholly unwarranted.”
“The amount of adjustments proposed by the IRS for 2010 to 2015 … overstates by billions of dollars the magnitude of the dispute,” Griffith said at the time, adding that Amgen has always “appropriately accounted” for its income and expenses.
Amgen called the tax claim “without merit” in its most recent quarterly report. “We are contesting the 2010–2012 and 2013–2015 notices through the judicial process,” the company stated. The IRS is also looking into Amgen’s taxes for the years 2016 to 2018.
