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Orthofix’s fired execs’ lewd, ‘graphic’ texts surface in legal battle (MedTechDive)
Orthofix didn’t originally specify the reasons behind the 2023 firing of its CEO, CFO and CLO. Now, a court case is illuminating the story behind the terminations.
When Orthofix Medical abruptly fired its then CEO, CFO, and chief legal officer in 2023, the company said it did so “for cause” after an investigation conducted by outside legal counsel found the three executives had “engaged in repeated inappropriate and offensive conduct that violated multiple code of conduct requirements.”
The medical device maker’s ousting of its then-CEO Keith Valentine, then-CFO John Bostjancic and then-CLO Patrick Keran rattled investors, with the stock plummeting 30% on the day of the announcement, even as the Lewisville, Texas-based company did not specify what those violations entailed.
Now the details behind what drove the firings — including a trove of off-color and at times lewd and racist private texts shared privately between the trio — are coming to light in litigation stemming from a lawsuit filed in a California court by the terminated executives.
The executives filed the suit in September against Catherine Burzik, who served as the company’s board chair from June 2023 until July 2024 and as interim CEO from the time Valentine was fired until January of last year, when Massimo Calafiore became CEO. It also named Wayne Burris, who currently serves on the board, as a defendant.
The lawsuit alleges, among other causes for the action, defamation, invasion of privacy and misrepresentation related to being told their personal mobile phones were being collected and “imaged” within the scope of an ongoing investigation. The suit also says that private texts were not “relevant.”
Further, in the original complaint filing, the complaint said the text exchanges were mostly from 2022, before they were employees of Orthofix. They also said the texts originally provided to them as a result of the investigation were exchanges between colleagues who had worked together since 2015, lived close to one another, were friends and had “a shared sense of humor” and that no one who received a text “objected to its content or expressed that the text was unwanted,” according to the complaint filed Sept. 10, 2024.
In defending their actions, the suit also asserts that the company’s code of conduct’s guidance on workplace conduct and diversity, equity and inclusion is “aimed at outward unwanted conduct involving and witnessed by other employees. Its applicability to private text messages not involving outward conduct with other nonconsenting employees is, at best, entirely unclear.”
In January, attorneys for the defendants filed a motion to strike some of the suit’s claims including defamation, taking a strong stand against the behaviors and asserting Orthofix fired the former executives after uncovering proof that each made “gross and improper sexist, homophobic, racist, and other vulgar and demeaning comments” about co-workers at work that “more than justified” their firing.
“Graphic commentary was often made during meetings and calls while the very individuals that the former executives demeaned were speaking,” the filing states. “If that were not sufficient cause for their terminations (and it is), Orthofix also discovered evidence that the former executives engaged in significant and repeated bullying and other mistreatment of Orthofix’s employees, that the culture the three managed demeaned and devalued the contributions of female employees, and that the three executives acted frequently with aggression, and accepted and promoted vulgarity and personal attacks. None of this is permissible in the workplace.”
Among some of the more moderately-worded text exchanges cited in the filing, during a call between Orthofix executives and market makers, Valentine texted with Bostjancic and Keran that he “’is always so patient and happy to answer any and all questions in these investor meetings with cute chicks!” Mr. Keran replied, “I would like to get more involved in IR activities!” Mr. Bostjancic replied that, “This one may not be of the drinking age yet! And seems fanatically over-interested in Orthobiologics.”
And on Aug. 5, 2023, Valentine used profanity in a text in expressing frustration with auditors. They “have more questions, so I have another 1-2 hours with [Orthofix’s] counsel,” he said. The filing states that Bostjancic shot back: “Insist on the hot one to interview you.”
Attorneys for both the plaintiff and defendants did not immediately respond to requests for comment. The complaint states Orthofix itself is not a party in the suit, although the complaint said it has claims against the company in a pending arbitration matter.
A spokesperson for Orthofix said that the company does not comment on pending litigation. However, in its February 10-K filing, the company asserts that several litigation and arbitration matters are pending in connection with the terminations of Valentine, Bostjancic and Keran.
“The company disagrees with the allegations contained in the arbitration demands and in the action against Ms. Burzik and Mr. Burris, and intends to vigorously defend the asserted claims. Due in part to the preliminary nature of this matter, the Company currently cannot reasonably estimate a possible loss, or range of loss, that may arise from these claims,” the filing reads.
Orthofix completed a merger with SeaSpine Holdings in January of 2023, creating a company that, according to a company release at the time, had 1,600 employees and a product portfolio of biologics, spinal hardware solutions and growth therapies distributed in 68 countries.
Orthofix fired these 3 top executives (its CEO, CFO and CLO from left to right) for cause, after an investigation found they violated multiple code of conduct requirements.
Stock suffers biggest selloff in 28 years after board votes unanimously to oust 3 top executives ‘for cause’
Orthofix fires CEO, CFO after investigation finds misconduct (MedTechDive)
The executives engaged in “repeated inappropriate and offensive conduct” inconsistent with the company’s values, Orthofix said.
Dive Brief:
- Spine device maker Orthofix Medical on Tuesday said it terminated the employment of its CEO, CFO and chief legal officer after an independent investigation by outside counsel determined the three managers engaged in “repeated inappropriate and offensive conduct.” The company’s shares tumbled 30% after the announcement, closing at $13.01 on the Nasdaq.
- Three other executives were named to fill the roles on an interim basis, including Catherine Burzik, current chair of the Orthofix board, who now steps into the CEO position, effective immediately. Burzik, who was re-appointed chair in June after serving in the post from 2021 to 2022, replaces Keith Valentine as CEO, Orthofix said.
- The management shakeup prompted a stock downgrade to “neutral” from BTIG analyst Ryan Zimmerman, who said Valentine was well known in the spine market, and he is concerned about the impact of the sudden leadership change on Orthofix’s business.
Dive Insight:
Orthofix, which also manufactures orthopedic implants, biologics and bone growth stimulation therapies, competes against medtech heavyweights such as Medtronic, Stryker, Zimmer Biomet and others across its markets. Looking to broaden its portfolio and take share from its larger rivals, the Lewisville, Texas-based company earlier this year acquired SeaSpine Holdings, a maker of product lines complementary to its own.
Valentine, SeaSpine’s chief executive since 2015, became CEO of the combined company. Before joining SeaSpine, he was president and chief operating officer of NuVasive, the spine device maker whose $3.1 billion acquisition by Globus Medical was just finalized.
In addition to Valentine, Orthofix terminated CFO John Bostjancic and Chief Legal Officer Patrick Keran. It named Geoffrey Gillespie, the company’s corporate controller, as interim CFO, and Puja Leekha, chief ethics and compliance officer, as interim chief legal officer.
The decision to oust the three executives followed an investigation that was conducted by outside legal counsel and overseen by the company’s independent directors. The board determined that each executive engaged in repeated inappropriate and offensive conduct that violated multiple code-of-conduct requirements and is inconsistent with the company’s values and culture, Orthofix said.
“Orthofix’s core values are built around fostering, cultivating and preserving a culture that is respectful, and we do not condone harassing or inappropriate conduct or statements of any kind,” Burzik said in a statement. The decisions, she said, “are necessary to ensure our employees, investors, customers, and other stakeholders have confidence in the Company’s leaders.”
The matters involving the three departed executives are not related to Orthofix’s operational results or previously filed financial statements and do not impact its strategy, the company added.
Orthofix in 2012 was convicted of U.S. criminal and civil violations related to the illegal promotion of its bone growth stimulators and subsequently restated several years of its financial results after it was found to have inflated revenue and income.
BTIG’s Zimmerman said he was worried about potential business fallout, and risk to the SeaSpine merger’s success, despite speaking with Orthofix board members and interim management who said the company’s latest troubles are confined to personal matters.
“It’s hard to separate the public-facing management that investors knew well and the potential impact to the business,” the analyst wrote in a note to clients.
Orthofix said its board would immediately begin a search for permanent successors.
Orthofix Medical Inc. investors suffered their worst day in nearly 30 years on Tuesday, after the spine and orthopedics company fired three top executives “for cause.”
The company OFIX, 2.31% said following an investigation by independent legal counsel overseen by its independent directors, the board voted unanimously to terminate then-Chief Executive Keith Valentine, Chief Financial Officer John Bostjancic and Chief Legal Officer Patrick Keran, effective immediately.
“As a result of the investigation, the board determined that each of these executives engaged in repeated inappropriate and offensive conduct that violated multiple code of conduct requirements and was inconsistent with the company’s values and culture,” the company said in a statement.
The stock plummeted 30.2% to $13.01, which was the lowest close since Dec. 2, 2008. The stock, which went public in May 1992, suffered its biggest one-day percentage drop since the record 33.9% selloff on Oct. 17, 1995.
The selloff has shaved about $206.5 million off Orthofix’s market capitalization, bringing it down to about $478 million as of Tuesday’s close.
The company said the terminations won’t change its strategy, results of operations or previously filed financial statements.
