A U.S. institutional investor is suing Boston Scientific for misleading investors with rosy projections for its cardiac rhythm management business.
The suit, which seeks class action status for investors who bought Boston Scientific shares from April 20, 2009 through March 12, 2010, accuses the company of misleading investors when it said its cardiac rhythm device business had stabilized after the 2006 acquisition of Guidant and was poised to grow, according to Reuters. However, the acquisition "did not turn out as planned," according to the complaint filed last Friday by the City of Roseville Employees' Retirement System in the U.S. District Court for the District of Massachusetts. The company was hit immediately with a warning letter that cited serious manufacturing quality problems at Guidant facilities, according to the complaint. And within months, the company was forced to issue recalls and warnings on 50,000 Guidant cardiac devices.
In October 2006, Fortune magazine lambasted the buyout; the company's stock dropped to $17 at the end of 2006 from a high of $27 when it announced the Guidant acquisition, according to the complaint. In an effort to boost its reputation, the plaintiffs allege the company made false statements and failed to disclose material facts regarding risks to its business, causing the stock to trade at artificially inflated prices.
The suit also names current CEO Ray Elliott , former CEO James Tobin and Chief Operations Officer Sam Leno as defendants.