The longer the investigation into the deaths of Medicis (MRX) CEO Jonah Shacknai's son and girlfriend goes on, the more of a media circus it becomes -- and the more pressure Medicis' board will come under to ask Shacknai to step aside.
There is no sign of that happening now. Shacknai is the founder of the company and is heavily identified with it. No one wants to see Medicis without Shacknai. And yet if the police eventually declare that the hanging death of Rebacca Zahau Nalepa at his Coronado, Calif., mansion is a homicide, it's difficult to see how he could continue to run the company.
The case would surely turn into a Casey Anthony-style media free-for-all, due to its bizarre circumstances: The death of his 6-year-old son in a fall down the mansion stairs; music loud enough to be heard by neighbors playing the next night; and the body of his girlfriend, naked and bound, found hanging from a balcony the morning after that.
The case has already made the leap from the business and local news pages into the Hollywood gossip sheets. Shacknai has hired a PR agency known for celebrity crisis management to handle the media interest.
The Zahau family has not been shy about insisting to reporters that Rebecca was not suicidal. Someone within the Shacknai circle has given out a number of family photos to the media. And it doesn't help subdue media interest that Zahau and Shacknai were an attractive couple, or that Shacknai planned to propose to Zahau before she died.
The financial backdrop
Easing Shacknai out of his company would be more of a psychological problem than a financial one. A severance could net him an annual bonus plus $6.7 million in unvested stock, according to SEC disclosures. He took home $6.3 million in compensation last year.
He also netted $1.4 million on July 6 when he exercised 276,290 options at $26.95/share (total $7,446,015) and sold 224,426 of them at $39.70 on the same day (total $8,909,712). The month before, on June 10, he moved 123,222 shares to an irrevocable trust for the benefit of his children.
Shacknair currently owns 832,856 shares of MRX, which has 150 million Class A shares, 1 million Class B shares and 5 million preferred shares outstanding.
MRX has fallen since Zahau's death. If the police were to bring charges in her death -- even if Shacknai had nothing to do with it -- Shacknai would be drawn in as a witness, distracting him from the business. Outside Medicis, the cosmetic pharmaceutical business is proceeding through a crucial period of consolidation, which would normally require strategic responses from Shacknai. Allergan (AGN), Medicis' main rival, agreed to acquire Vicept this week. That deal came on the heels of Valeant (VRX)'s $345 million acquisition of the skincare unit of Johnson & Johnson (JNJ); and its planned $425 million buyout of Sanofi (SNY)'s Dermik skincare business.
If the police return a verdict of suicide, Medicis has a chance of getting back to normal. If not, then Shacknai faces some unpleasant, and unfair, conversations with his colleagues.
Updated Timeline of Deaths at Jonah Shacknai's Coronado Mansion:
- May 3: Coronado city council meets to approve architectural revisions to the historic house that have angered Shacknai's neighbors.
- June 10: Shacknai moves 123,222 stock options in MRX into an irrevocable trust for his children.
- July 6: Shacknai nets $1.4 million exercising stock options.
- Prior to July 9: Jonah Shacknai reportedly planned to propose to Rebecca Zahau Nalepa
- Saturday/Sunday July 9 and 10: Zahau plans a party at the Shacknai house.
- Monday, July 11, morning: Jonah Shacknai's son, 6-year-old Max, falls down the stairs. Police say it is an accident. Max is found not breathing and without a pulse. He is taken to hospital where he is believed to be in a coma. Nalepa (who changed back to her maiden name, Zahau, in May) was looking after Max and a young girl aged 13 at the time. The girl is believed to be Rebecca's younger sister, and it is she, not Zahau, who called 911.* That afternoon: Zahau Nalepa asks Camp Diggity Dogs if her Weimaraner could be boarded following Max's accident. Her demeanor is "nice, polite, subdued and mellow." Jonah's brother Adam Shacknai reportedly arrives at the house after Max's fall.
- Tuesday, July 12: Zahau is seen sobbing and distraught at the kennels.
- That evening: A loud party or loud music is heard by neighbors of the house. Zahau is last seen alive Tuesday evening. She also talks to her sister on the phone as she gets ready for bed, sounding "normal."
- Wednesday July 13, 6.45 a.m.: Shacknai's brother, Adam, discovers Nalepa hanging naked from an outdoor balcony by her neck, with her hands and feet bound in orange cord. He calls 911. Adam and Nalepa are the only people on the property at the time, police said. Adam is currently not considered a suspect. Later, Jonah's ex-wife Dina Shacknai is reported to be "a witness in Zahau's death."
That evening: defense attorney Paul Pfingst is retained to represent someone in the family.
- Thursday, July 14: Zahau Nalepa autopsy scheduled. Results not released.
- Sunday, July 17: Max dies in hospital.
- Monday July 18: Police launch investigation into Max's death. "Sexual accident" theory of Zahau Nalepa's death is ruled out by authorities. Max's autopsy scheduled for July 17 or 18. Shacknai hires Sitrick & Co. PR firm to represent him.
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