Topeka ? Thomas Wiggans, who recently returned to Kansas and is running as a Democrat for governor, was part of a $12.75 million settlement in a lawsuit that alleged securities fraud against the company he led.

The lawsuit alleged Connetics Corp., a California pharmaceutical firm, misled investors about the safety of an acne gel the company was developing. Wiggans was chief executive office of Connetics during the disputed period.

Tom Wiggans

The lawsuit also alleged the company issued false financial statements to inflate its worth. The company contended its statements were not false, according to court records, and Wiggans has denied any wrongdoing.

The various lawsuits filed by investors were consolidated and the Oklahoma teachers retirement system was designated as the lead plaintiff. The pension system had purchased stock in the company.

The settlement was signed off in federal court in October in California, just weeks before Wiggans announced his bid for governor.

Wiggans, 57, was raised in Kansas but spent his adult life in the pharmaceutical business in California. He returned to Kansas early this year.

If Wiggans were to win the Democratic Party primary in 2010 he would most likely face U.S. Sen. Sam Brownback, R-Kan., who is leaving the Senate to run for governor.

When asked to comment about the lawsuit and settlement, Brownback’s campaign manager, David Kensinger, said, “He is exactly the kind of person the Democratic Party claims it wants to protect us from — except in Kansas, where the Democratic Party wants to make him governor.”

Amy Jordan Wooden, a spokeswoman for Wiggans, said the settlement of the litigation showed that Wiggans had the kind of problem-solving experience that Kansas needs.

“As a CEO, Tom has had to deal with lots of challenging situations,” she said.

“Anyone who has owned or run a business knows that, unfortunately, legal matters are one of the challenges any business will face from time to time. Tom was able to lead Connetics through this situation, with no findings of wrongdoing, and come out stronger on the other side. It’s proof that he knows how to roll up his sleeves and manage during challenging times.”

The disputed acne gel was called Velac, and during testing of the drug it caused a high rate of cancers in mice, according to court documents.

“The complaint alleges that defendants misled investors about the safety of Velac, and the prospects for FDA approval while knowing that Velac had failed the Mouse Study for nearly a year,” court records said.

Investors also alleged they suffered economic damages after the truth was revealed about misleading statements and actions by Wiggans and other executives that had inflated the company’s worth.

The company had also been under the scrutiny of the U.S. Securities and Exchange Commission. An SEC news release from 2008 shows two co-defendants and executives of Connetics settled with the government on charges of insider trading based on allegations of selling off company stock after receiving insider knowledge that the FDA had problems with Velac because of the cancer concerns.