Feb 8 , 2020

New York investor's lawsuit against local firm has lasted a decade.

The Ministry of Trade & Industry has rejected a complaint from a New York-based pharmaceutical company, which claimed to be cheated by its local partner.

RX Africa filed a complaint letter requesting the Ministry intervene in the case it brought against Ethiopian Agriculture Industry Amalgamated S.C. The two have been in a court battle for nine years over their ownership stakes in the then Sino-Ethiopia Sunshine Pharmaceutical Plc, a plant the duo own. RX Africa claims that the local firm has allegedly squandered the 19.2 million Br it contributed to raising the capital of the company.

Sino-Ethiopia Sunshine, the disputed company, was founded in 1998 by Ethiopian Agriculture Industry and China Jiangxi with capital of 18.2 million Br. The plant rests on 21,000Sqm of land in (Bishoftu) Debre Zeit, Oromia Regional State, and was founded to make HIV/AIDS, malaria, tuberculosis and other generic drugs.

However, after eight years of operations, China Jiangxi gave up on its share due to a dispute with the local firm. Rx Africa bought the Chinese company's share for 412,000 dollars in 2006, making it a partner with Agriculture Industry Amalgamated.

Then the duo changed the name of the company to Rx Africa Ethiopia Pharmaceuticals Plc and appointed Mulugeta Bezabeh (PhD), the CEO of Ethiopian Agriculture Industry Amalgamated, as general manager of the pharmaceutical firm.

In 2010 Margie Chassman, owner of Rx Africa, filed a suit at Federal First Instance Court charging Mulugeta, who has since passed away, with leading the company to losses.

Rx Africa also alleged Mulugeta failed to send audit reports for four years, leading the company to lose 70pc of the title deed of the plant, fixing his salary at 250,000 dollars a year without considering the annual profit of the company and failing to add the 19.2 million Br of capital Rx Africa transferred to the company.

The plaintiff appealed to the court to rule on the removal of Mulugeta from his post and order a general assembly to vote on the capital raise of the company.

Mulugeta in his defence argued that the plaintiff did not transfer 19.2 million Br to the company’s account; instead, he said he raised 17.7 million Br in capital. Mulugeta also asserted that the company was audited in the first two years of operation after the merger, but the audit report was not sent to Rx Africa. He also said that the 2009 audit report was sent to New York.

After hearing the two sides, the First Instance Court ruled in favour of Rx Africa, allowing it to appoint a temporary general manager and carry out an audit on the 19.2 million Br.

Displeased with the Court's ruling, Mulugeta appealed to the High Court in April 2011. After reviewing the appeal, the Court sustained the ruling on the audit of 19.2 million Br. But it reversed the lower court's ruling in removing Mulugeta from the general manager post.

Rx Africa again took the case to the Supreme Court, which sustained the First Instance Court's ruling on the general manager’s removal and execution of the 19.2 million Br audit.

Then Rx Africa jumped into the execution of the ruling at the First Instance Court. However, the lower court rejected the request, leading Rx Africa to appeal to the Federal High Court, which remanded the case back to the lower court, instructing it to examine under whose name the capital should be registered.

During the session, Yakob Mulugeta (PhD), Meley Mulugeta (PhD), Milka Mulugeta and his spouse Alemtsehay Zerihun, who are the descendants of Mulugeta, appeared before the court since Mulugeta was deceased. They are also his successors and shareholders of the company.

After examining the case, the First Instance Court stated the amount to be registered in the name of Rx Africa and then be authenticated by the Documents Authentication & Registration Agency. But it reversed this order and decided that the general assembly should vote on it.

Opposing the lower court’s decision, Rx Africa appealed to the High Court on October 25, 2019. The High Court, presided over by judge Yenenesh Bahiru, sustained the lower court’s ruling, stating that the general assembly should make its own decision.

"Even if the general assembly is called to vote on in whose name the money should be registered," said Meley Mulugeta, daughter of the former general manager, "we won't vote the money to go to them."

Following this, Rx Africa, through its legal representative Samey Gebremengist, filed a letter to the Ministry of Trade on November 25, 2019, calling for intervention into the case.

Rx Africa requested that the Ministry investigate the 19.2 million Br capital injection Rx Africa made and the 17.7 million Br capital raise made by Mulugeta. In its letter, Rx Africa claimed that it transferred 2.2 million dollars to the company’s account in six rounds that was not registered capital.

On January 16, 2020, the Ministry responded to Rx Africa, stating from its database that it had received an audit report that was authenticated by the Documents Authentication & Registration Agency showing the former general manager raised the 17.8 million Br of capital.

“Rx Africa came to Ethiopia to manufacture quality drugs," said Samey. “But it ended up with fraud and accounting manipulation."

Liku Worku, a lawyer for Mulugeta's family, argues that Rx Africa initially made claims about audit reports, then diverted to appeal that the money must be recorded in its name.

Fikadu Petros, a lawyer who specializes in share companies, says that Rx Africa cannot claim the money once it has been deposited, no matter the reason.

"Only share certificates registered by the shareholder's name at that company are valid," he added.

Margie Chassman, or Margaret, is married to David Blech, once known as the "King of Biotech" for being an early investor or founder of a slew of successful pharmaceutical firms before missteps cost him most of his 300-million-dollar fortune.

PUBLISHED ON Feb 08,2020 [ VOL 20 , NO 1032]

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