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Urohealth Is Facing 7 Shareholder Fraud Suits

September 11, 1997|BARBARA MARSH | TIMES STAFF WRITER

Urohealth Systems Inc., a collection of medical device companies amassed by deal maker Charles A. Laverty, is facing mounting litigation by shareholders who claim the company misled them about its financial prospects.

Seven lawsuits, filed in federal district court in Los Angeles and Orange County in the last three months, allege that the Newport Beach-based company engaged in securities fraud in the last year by exaggerating its financial results.

Shareholders allege that the company was attempting to inflate the price of its stock and boost sales of securities to finance Urohealth's aggressive acquisition strategy.

The defendants also include Laverty and James L. Johnson, the company's former chief financial officer, who recently resigned. Some suits also name company officers and directors, as well as the company's investment banking firms, Bear Stearns & Co., Piper Jaffray Inc. and Needham & Co.

The company disclosed the litigation in a document filed recently with the Securities and Exchange Commission. Defendants haven't yet filed responses to the claims and company officials wouldn't comment. A lawyer for the investment firms said they "intend to contest the litigation vigorously."

U.S. District Judge Gary L. Taylor in Santa Ana is expected to consolidate the actions in Orange County. He has scheduled a hearing Oct. 6.

Concerned investors triggered a free fall in its stock price from $9.50 in mid-June to as low as $4.75 on July 21. On Wednesday, Urohealth shares fell 13 cents to close at $4.38 on Nasdaq.

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