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Guidant defrauded investors, suit claims

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Lisa Salberg Find out more about Lisa Salberg
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  • Guidant defrauded investors, suit claims

    Case, which names six executives, alleges cover-up of device woes to benefit J&J merger.


    By Jeff Swiatek
    [email protected]


    A securities fraud lawsuit filed in federal court in Indianapolis accuses Guidant Corp. and six of its executives of covering up problems with the firm's heart defibrillators in order to keep the stock price riding high for its pending merger with Johnson & Johnson.

    The lawsuit, filed Friday, said Guidant executives "concealed long-standing, life-threatening defects" in several models of defibrillators that the company recalled in the past month.

    As a result of the recalls, Guidant's stock price fell and shareholders suffered financial losses, the lawsuit says.

    The plaintiff, Moussa Yeroushalmi, wants a judge to certify the lawsuit as a class action to allow anyone to join the case who bought Guidant stock between Dec. 15 last year and June 17.

    The Dec. 15 date refers to the day Guidant announced a pending $25 billion merger with Johnson & Johnson that will pay Guidant shareholders $76 in stock and cash for each of their shares.

    Guidant's stock has lost about 15 percent of its value, falling about $10 a share, since the first of three defibrillator recalls was issued May 24. The devices were recalled for design flaws and problems with their memories and a balky switch.

    The stock gained 90 cents a share on Monday, closing at $64.80.

    Some stock analysts have predicted that Johnson & Johnson will renegotiate the deal in order to pay a lower price for Guidant's stock. That could give shareholders in a securities fraud case reason to cite additional damages.

    The lawsuit was filed by the law firm of Scott + Scott of Colchester, Conn., and San Diego. Co-counsel are Indianapolis attorneys Irwin B. Levin and Richard E. Shevitz.

    The lawsuit names six Guidant executives -- Ronald W. Dollens, Keith E. Brauer, Guido J. Neels, Beverly H. Lorell, Ronald N. Spaulding and William F. McConnell Jr. -- it says sold $39.5 million worth of Guidant stock they personally owned between Jan. 31 and May 23.

    The lawsuit calls it "troubling" that Guidant didn't issue the first recall until The New York Times was on the verge of printing a May 24 story about the defibrillator problems.

    Baltimore attorney Charles J. Piven said Monday he also intends to file a class-action securities case against Guidant for making "materially false and misleading statements to the market" since Dec. 15 that artificially inflated its share price.

    Guidant faced a similar securities fraud lawsuit, filed in 2003 in federal court in Indianapolis, over its handling of problems with its abdominal aortic graft product, which was pulled from the market. That case was dismissed last November by U.S. District Judge Sarah Evans Barker, who said it failed to show that Guidant intentionally misled shareholders.

    The new case is filed in the court of U.S. District Judge John Tinder.
    Knowledge is power ... Stay informed!
    YOU can make a difference - all you have to do is try!

    Dx age 12 current age 46 and counting!
    lost: 5 family members to HCM (SCD, Stroke, CHF)
    Others diagnosed living with HCM (or gene +) include - daughter, niece, nephew, cousin, sister and many many friends!
    Therapy - ICD (implanted 97, 01, 04 and 11, medication
    Currently not obstructed
    Complications - unnecessary pacemaker and stroke (unrelated to each other)

  • #2
    Guidant faces Canadian lawsuitBy TAVIA GRANT

    Wednesday, June 29, 2005 Updated at 9:13 AM EDT

    Globe and Mail Update

    Adrien Lefrancois, a 37-year-old from Thunder Bay, Ontario, worries about whether his defibrillator is working or not.

    The reason? Last week, Guidant Corp., the U.S. maker of the device used to control irregular heartbeats, issued its second safety advisory in a week about its implantable defibrillators, telling doctors to stop using five of the models because they could malfunction. They may have to be recalled.

    Now, a Canadian a class-action lawsuit against the company is being launched. Mr. Lefrancois is named as the representative plaintiff in the case. He received his defibrillator in 2002.

    “Guidant knew about the problem, but they just didn't say anything,” Mr. Lefrancois said in a statement. “They lied to me about the reliability of this device. They should be more concerned about patients than their stockholders.”

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    The Canadian lawsuit, announced Wednesday, is on behalf of patients who have received the defective devices. Toronto law firm Rochon Genova LLP is representing the plaintiffs. The statement didn't say how many people are involved.

    “It is alleged that despite its knowledge that the device was defective, Guidant continued to market the defibrillators without disclosing the problem to medical professionals and patients,” the law firm's statement said.

    None of the allegations has been proven in court.

    Guidant is facing at least two comparable legal actions in the U.S.

    About 46,000 of the devices in last week's announcement are in use worldwide, the company said.

    The Guidant defibrillator is used to control irregular heartbeats, rapid heartbeats and slow heartbeats. When the device detects an irregular heart beat, it sends an electrical shock to the heart to restore normal heart rhythm.

    The defibrillator has been linked to a number of short-circuiting incidences, which have, in at least one case, resulted in the death of a patient in the United States.

    In May, Guidant told physicians about a failure in its defibrillators. It is alleged that they had known about the defect since 1994. Guidant says that under most circumstances their product works properly, and it does not recommend replacement surgery.

    Shares in Guidant have fallen 11 per cent in the past month.
    Knowledge is power ... Stay informed!
    YOU can make a difference - all you have to do is try!

    Dx age 12 current age 46 and counting!
    lost: 5 family members to HCM (SCD, Stroke, CHF)
    Others diagnosed living with HCM (or gene +) include - daughter, niece, nephew, cousin, sister and many many friends!
    Therapy - ICD (implanted 97, 01, 04 and 11, medication
    Currently not obstructed
    Complications - unnecessary pacemaker and stroke (unrelated to each other)

    Comment


    • #3
      If anyone is interested I have access to this teleconfrence. It will only be available until July 1, 2005 if you are interested in the contact information email Kelly at [email protected]
      Lisa


      June 29, 2005


      Analyst says Guidant may have defibrillator fix; shares rise


      Indianapolis (Star report) -- Guidant Inc.'s stock price rose 90 cents a share to close at $65.70 on Tuesday, the same day an analyst told investors the company may have found a simple way to fix some of its top-selling heart defibrillators that last week it ordered doctors not to use.

      "They believe they found the problem," said Jan Wald, a medical device analyst for A.G. Edwards & Sons investment firm. And the solution appears to be "a quick fix to the patient" that won't involve implanting a new unit, Wald said during a teleconference with investors.

      He said he expects Guidant will work with the Food and Drug Administration to resume sales of the recalled defibrillators in one to two months.

      Wald didn't reveal his source for the information. He is a former Guidant employee who helped design and test its defibrillators.

      If Guidant has found an easy fix, that would be welcome news to the Indianapolis company, which is reeling from three recall notices in the past month.

      The newer defibrillator models that Guidant told doctors not to use are some of Guidant's most important products. They carry the brand names Contak Renewal or Renewal and make up about 22 percent of the company's total sales, according to Thom Gunderson, a medical device analyst in Minneapolis for Piper Jaffray & Co. investment firm.
      Knowledge is power ... Stay informed!
      YOU can make a difference - all you have to do is try!

      Dx age 12 current age 46 and counting!
      lost: 5 family members to HCM (SCD, Stroke, CHF)
      Others diagnosed living with HCM (or gene +) include - daughter, niece, nephew, cousin, sister and many many friends!
      Therapy - ICD (implanted 97, 01, 04 and 11, medication
      Currently not obstructed
      Complications - unnecessary pacemaker and stroke (unrelated to each other)

      Comment

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