Endocare Hit With Shareholder Lawsuits After Warning of, Then Delaying Results
By VITA REED
Endocare Inc., the Irvine medical device maker that saw its stock price tank after it said its third-quarter results would be disappointing,and then delayed their release,now has to deal with lawsuits from disgruntled shareholders.
Milberg Weiss Bershad Hynes & Lerach LLP, the San Diego firm of William Lerach that’s famous for suing companies, fired the first shot on Nov. 1 when it filed a class-action suit against Endocare. The complaint in U.S. District Court in Los Angeles alleges violations of federal securities laws. The attorneys are representing plaintiffs Gary and Stacey Slutsky.
The suit, filed by Lerach, Milberg Weiss partner Darren Robbins and Jeffrey Bernstein, a lawyer from Great Neck, N.Y., charges that Endocare violated securities laws by issuing a series of “materially false and misleading statements” in the past year.
The suit alleges that Endocare’s statements artificially inflated the price of the company’s stock during the period.
“As a result of this inflation, Endocare was able to complete a public offering of 4 million shares, raising proceeds of $68 million on Nov. 16, 2001,” according to the suit.
Endocare officials couldn’t be reached for comment. Besides the company, the five suits name Paul Mikus, Endocare’s chief executive, and John Cracchiolo, its chief financial officer, as defendants.
After the Milberg Weiss suit became public, the Law Offices of Charles J. Piven P.A. in Baltimore, Kirby McInerney & Squire LLP in New York and Schiffrin & Barroway of Bala Cynwyd, Pa., said they had launched class-action suits against Endocare. Those complaints also cover the period cited in the Milberg Weiss suit.
The fifth suit was filed late last week.
The events that led to the shareholder suits started in late October, when Endocare officials said the company’s third-quarter results wouldn’t meet expectations. Weaker-than-expected sales of Endocare’s cryoablation system, which freezes and destroys cancerous prostate tissue and other tumors, were cited as the main reason for the warning.
Wall Street pummeled Endocare’s stock after the warning, driving its price down 42% to 5 its lowest level since mid-1999. Endocare’s shares fell another 42% to 2.98 after the company decided to delay its third-quarter results.
The company’s stock was trading around 3 late last week. Endocare counted a recent market value of $74 million.
The bad news all surfaced shortly after Endocare reached the No. 2 spot on the Business Journal’s list of fastest-growing companies. Endocare had ridden strong sales of its cancer treatment to a 1,088% increase in sales for the three-year period ended June 30.
Lerach is known for suing companies, especially after a sharp share-price drop or buyout. He’s taken on many of Silicon Valley’s biggest technology companies, such as Apple Computer Inc. Many corporate executives resent Lerach’s suits, considering them legal extortion.
Lerach’s sued several OC companies, such as Fluor Corp., Western Digital Corp., PacifiCare Health Systems Inc. and WFS Financial Inc.
