Broker Is Barred From Wooing ICN Holders : Management: Judge says Rafi Khan lied to court in denying he had financial stake in a proxy fight aimed at company founder Milan Panic. Experts say ruling could lead to criminal case.

COSTA MESA —  A federal judge in New York said in a court order that a Beverly Hills stockbroker used inside information and lied to the court when he denied having any financial interest in a proxy fight against ICN Pharmaceuticals Inc.

The broker, Rafi Khan of Reynolds Kendrick & Stratton in Beverly Hills, is also accused of violating a temporary restraining order barring him from soliciting shareholders, ICN attorney Arnold I. Burns said.

The revelations were outlined in an order issued Thursday by U.S. District Judge John Sprizzo barring Khan from seeking further support from disgruntled investors. Transcripts of the ruling were released Tuesday.

The order is the beginning of a civil case against Khan. And experts in securities law speculated Tuesday that it might lead to criminal prosecution. The U.S. Securities and Exchange Commission is aware of Sprizzo’s findings, said a person familiar with the case.

Officials at the New York Stock Exchange said Tuesday, however, that they had not been informed of Sprizzo’s ruling.

Samuel Scott Miller, a securities attorney in New York, said that, considering the tone of Sprizzo’s comments, the exchange will “undoubtedly take an interest. I can’t say with any precision what they will do, but they will be interested.”

He also said that the U.S. attorney’s office could initiate its own investigation based on the transcripts. He cautioned, however, that a criminal case would require a much stronger burden of proof against Khan.

The ruling “was a little bit short of due process,” Miller said. “They have to give him a better chance to be heard.”

Sprizzo’s ruling appears to have ended--or at least slowed--the battle for control of ICN, the Costa Mesa pharmaceuticals company founded by Milan Panic in 1960.

Panic, who became an international figure last year when he served briefly as prime minister of his native Yugoslavia, said Tuesday of the proxy fight: “I was perplexed as to why this has happened. . . . I was immediately determined to expose the truth, and that has been done.”

Khan, who would not comment on the judge’s ruling, has said that he represents a growing bloc of shareholders upset with Panic’s flamboyant style and his lavish salary.

Panic drew about $6 million in salary and stock bonuses for 1991 and continued to collect his annual salary of $500,000 while serving in Yugoslavia.

Khan, who owns about 1% of ICN’s stock, was once a strong booster of the company when other brokerages and financial analysts had all but given up following it. But on April 1, Khan told the SEC that he wanted to remove Panic and the eight other directors and replace them with a seven-member board, including himself.

None of the members of that proposed slate of directors were available for comment Tuesday.

In the court order, Sprizzo agreed with ICN’s argument that Khan was acting as a broker, selling stock in ICN and its three subsidiaries: SPI Pharmaceuticals Inc., ICN Biomedicals Inc. and Viratek Inc. Khan was therefore obligated to the company as a fiduciary, or trustee, Sprizzo said.

As a fiduciary, Sprizzo said, Khan was “seeking to enrich himself and the members of his family by, in effect, undermining or trading on or violating those fiduciary responsibilities.”

Sprizzo also said in court last week that Khan lied during testimony on April 20 by denying that he had knowledge of a public offering of Viratek stock in October. While working at the Beverly Hills brokerage H.J. Meyers & Co. last year, Khan traded 17.6 million shares of Viratek stock, according to the transcript released Tuesday. “The court finds his testimony incredible and finds that that testimony was false and willfully false,” Sprizzo said.

An H.J. Meyers spokeswoman said the brokerage has not read Sprizzo’s ruling and therefore could not comment.

Sprizzo also said that Khan lied when he told the judge that he was not representing a group in his efforts to oust Panic.

“He had the backing of enough shareholders to effect a change in management and was in effect telling them that they had better get on his ship,” Sprizzo said.

At one point, Khan reportedly tried to garner the support of ICN Chief Operating Officer Adam Jerney, who took the reins of the conglomerate while Panic was in Yugoslavia.

“First he told Mr. Jerney . . . what a wonderful person he was and that the company should not be dragged down by Mr. Panic’s presence, and that he made every effort he could to enlist him on his team,” Sprizzo said. “When he refused, . . . he became the object of attack.”

ICN attorney Burns said that a hearing is set for next week at which the company will add a complaint that Khan continued to solicit shareholder support despite a temporary restraining order barring him from doing so. Thursday’s preliminary injunction broadened the power of that initial order.