The plea arrangement follows a year-long federal investigation into the company’s production and distribution facility in Fort Mill. The probe by the U.S. Food and Drug Administration led to product recalls and layoffs. The company eventually filed for Chapter 11 bankruptcy this spring.

The guilty plea to one count of mail fraud stems from a December 2006 incident where quality control officials at the Fort Mill plant “gave the false appearance” that a batch of drugs had passed quality tests and “allowed the nonconforming drugs to be shipped to a customer,” according to a document filed in U.S. Bankruptcy Court in Delaware.

In exchange for Leiner’s plea, the Justice Department will agree not to further prosecute the company because “no adverse health effects” have been discovered related to the FDA violations, court records state. If adverse health effects come to light, the department would be allowed to prosecute further. The deal does not prohibit the Justice Department from prosecuting any Leiner employees suspected of criminal activity related to the Fort Mill violations.

Leiner agreed to accept the plea arrangement in order to expedite its Chapter 11 bankruptcy and sell the company, court records show. “We are pleased to put these issues behind us,” Leiner CEO Rob Reynolds said in a prepared statement. “And we are committed to providing consumers with the best value and highest-quality products available in the marketplace.”

Controversy has swirled around Leiner and its products since January 2007, when an employee inside the company's Fort Mill plant reported violations of good manufacturing practices to the FDA. Among the allegations: the company manipulated quality test results and falsified records about product impurity results, according to an affidavit filed in U.S. District Court last year.

An FDA investigation at the Fort Mill plant followed and a list of violations were found, including allowing drugs that failed quality tests to remain in the market, failing to adequately train staff, not cleaning equipment to standards and not identifying black specks found in some pills, according to an FDA report obtained by The Herald.

Common painkillers (ibuprofen and acetaminophen) and allergy medication (loratadine) were among the drugs listed in the report. After the FDA probe, Leiner shut down all over-the-counter drug manufacturing and distribution last year. In April 2007, it recalled all of its over-the-counter products from store shelves, and in June laid off 540 Fort Mill workers, changing the Fort Mill production facility into a distribution center.

The company's over-the-counter products formerly were sold as store brands at Wal-Mart, CVS, Costco and other retailers.

Last fall, the company confirmed it was being investigated by the U.S. Department of Justice related to the FDA issues in Fort Mill. And in early January, Leiner closed its only other over-the-counter drug plant in Wilson, N.C., and outsourced all remaining orders for over-the-counter drugs, according to SEC filings.

Former Leiner CEO Bob Kaminski resigned and former Chief Financial Officer Kevin McDonnell’s employment was terminated earlier this year.

For more, see Tuesday’s Herald