ArthroCare To Settle Class Action Suits For $74M |

ArthroCare To Settle Class Action Suits For $74M

  

 

ArthroCare To Settle Class Action Suits For $74 Mln, Stock Up (Nasdaq)

(RTTNews) – ArthroCare Corp. (ARTC) Monday said it reached an agreement in principle to settle the private securities class action suits pending against the company and two of its former officers for $74 million. In early morning trade, shares of ArthroCare gapped open sharply higher and currently trading up over 10 percent on more than average volume.

The settlement would finalize all claims arising from the purchase or sale of ArthroCare securities between December 11, 2007 and February 18, 2009, inclusive. The settlement excludes those members of the Class who opt out. The payment of $74 million would be made in to a settlement fund and the settlement is subject to final documentation and court approval.

The suits were previously consolidated into the action titled In Re ArthroCare Corporation Securities Litigation in the U.S. District Court, Western District of Texas. If the settlement is approved, counsel for the plaintiff would apply for an award of attorneys’ fees and reimbursement of expenses from the settlement fund.

The first evidence of trouble emerged in July 2008 when the company announced that it would have to restate its 2006 and 2007 financial results after the audit committee of its board identified errors in its sales calculations. Following the news, the shares plunged 48 percent to $21.14 that month. In December, the same year, ArthoCare expanded the scope of restatement by including the years ended December 31, 2000 through 2005. By the end of December 2008, shares of ArthoCare were languishing around $4.

The first-half of 2009 brought more troubles for ArthroCare. The company was suspended from trading on the Nasdaq effective January 16, 2009, following its inability to file a quarterly report since April 2008. In February, a review conducted by the audit committee identified certain improper practices in the insurance billing and healthcare compliance practices associated with the company’s Spine business unit.

In November of 2009, the company completed restatement of its historical financial statements and filed its Annual Report on Form 10-K for the year ended December 31, 2008

The company also came under investigations by the SEC and the U.S. Attorney Offices in Florida and North Carolina. The company settled with the SEC in February this year. Under the settlement, the company has consented to the entry of an administrative order that directs the company to cease and desist from committing or causing violations of the reporting, books and records and internal control provisions of the federal securities laws.

On November 2, the company reported a decrease of 3.7 percent in revenue from continuing operations for the third quarter of 2011 to $83.3 million. Investigation and restatement related costs for the quarter were $6.0 million, resulting in sharply lower net income of $1.6 million compared with $8.4 million last year.

ARTC is currently trading at $28.30, up $2.74 or 10.72%, on the Nasdaq. Over the past year, the stock traded in a range of $25.48 – $36.00.

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