St. Jude Medical Inc. (STJ:US) and three top officers were sued by a public employee pension plan over claims they increased share value by making misleading statements about the quality of Durata cardio-defibrillator wires.
“Defendants made false and misleading statements, and concealed material information relating to the safety, durability, and manufacturing processes” of the Durata leads, according to the complaint filed Dec. 10 by the Canton, Massachusetts-based Norfolk County Retirement System.
The lawsuit, seeking group status for anyone who acquired stock in the St. Paul, Minnesota-based company from Oct. 19, 2011, to Nov. 20, 2012, and unspecified money damages, was filed in federal court in Minneapolis.
Named as co-defendants in the complaint are Chief Executive Officer Daniel J. Starks, Executive Vice President John C. Heinmiller and Chief Financial Officer Donald J. Zurbay.
On Nov. 21, St. Jude shares fell $4.34, or 12 percent, after the U.S. Food and Drug Administration publicly criticized the company’s method of testing the Durata wires.
The Durata leads had been brought to market to replace the company’s Riata-branded wires, which were recalled in 2010 after research showed they could breach their insulating casing, potentially leading to excessive shocks or failing to work when needed.
Durata’s Optim insulation was later found to fray when it rubbed against another object.
“As early as October 19, 2011, defendants made positive statements about the safety and efficacy of Durata Leads despite being aware that they suffered similar design flaws and presented similar risks to Riata,” according to the complaint.
Still, in earnings calls and regulatory filings, the individual defendants, including Implantable Electronic Systems Division President Eric Fain, allegedly gave false assurances and withheld damaging information, according to the complaint.
St. Jude officials “believe the lawsuit is without merit” and will fight the allegations, Amy Jo Meyer, a company spokeswoman, said yesterday in an e-mailed statement.
The case is Norfolk County Retirement System v. St. Jude Medical Inc., 12-cv-3087, U.S. District Court, District of Minnesota (Minneapolis).
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