Shareholder threatens defamation suit in ICN dispute; effort to unseat Panic as chairman leads to controversy.

The Beverly Hills stockbroker who started a shareholder fight to remove former Yugoslavian leader Milan Panic as chairman of ICN Pharmaceuticals Inc. said last Thursday he plans to sue Panic this week for defamation of character.

"I intend to sue him for $50 million," said Rafi M. Khan, a stockbroker who voluntarily left his position with the H.J. Meyers & Co. brokerage in Beverly Hills due to the controversy over who will control Costa Mesa-based ICN.

The ICN tempest began several weeks ago, when Khan, who has invested $2 million of his own money in ICN, charged that Panic has received substantial salaries and bonuses while shareholders have received erratic and low returns. Khan is calling for the ouster of Panic and the company's board of directors through a "consent" process which requires written approval from the shareholders representing a majority of ICN stock or 10.2 million shares.

Specifically, Khan charges that Panic received his $619,000 salary from the company last year, even when he was attempting to lead Yugoslavia for nine months. The 63-year-old Panic has chaired ICN since its inception in 1960.

The company on April 5 filed a suit against the 42-year-old Khan in the U.S. District Court for the Southern District of New York alleging that he used insider information to learn about the company while at H.J. Meyers to start the consent fight.

"I have done nothing wrong. My record is without blemish," said Khan, "I was a broker. I had no fiduciary responsibilities to ICN. My fiduciary responsibility was only to my clients."

Khan argues that Panic is attempting to ruin his reputation. Kahn is now employed with Beverly Hills-based Reynolds, Kendrick, Stratton Inc.

Khan said he would file a defamation suit against Panic in New York, possibly as early as Monday.

In his specific complaints against Panic, Khan argues that total cash compensation paid to Panic in 1991 was $768,681. In addition, in April 1992 the board voted to grant Panic a bonus of 200,000 shares of common stock of an ICN subsidiary, which was worth an estimated $5.3 million.

Khan argues this is excessive because from January 1992 to December 1992, ICN stock fell from $20.37 per share to $6.50 and the company's financial performance was lackluster.

In his consent action, Khan has not only asked for removal of Panic, but of the entire eight members of the board. He has asked shareholders to approve a new slate of directors.

Robert Finch, a former U.S. Secretary of Health, Education and Welfare and ICN board member, said the board wanted Panic to come back from Yugoslavia and head the company, which is why he was paid a salary instead of taking early retirement.

Finch criticized the composition of the board proposed by Khan, saying the people he has proposed do not have strong medical backgrounds.

The shareholder battle comes on the eve of what could be a potentially promising period for the company. It looks as if the company's only proprietary drug, ribavirin, could be successful in fighting hepatitis C, a disease of the liver, analysts have said.

ICN stock closed last Tuesday at $11.50 per share, down 12 cents.