BOSTON (Legal Newsline) -- In a class action complaint filed in U.S. District Court for the District of Massachusetts, shareholders allege Alere Inc., a global diagnostic device and service provider, violated several laws in a proposed merger with Abbott Laboratories, a global health care company.
Glazer Capital Management LP is the lead plaintiff. Co-plaintiffs are OFI Asset Management, and the NECA-IBEW Pension Trust Fund (the Decatur Plan). The group alleges it bought Alere securities and suffered financial losses as a result.
In February, Abbott agreed to buy Alere for almost $6 billion, or $56 a share. Subsequently, serious issues with this proposed merger arose.
According to the complaint, “less than one month after the merger agreement was signed – the defendants’ scheme began to unravel when they disclosed, for the first time, that the company would be unable to timely file its 2015 annual report on form 10-K (the “2015 form 10-K”)” as the 1934 Securities Exchange Act requires.
Alere’s inability to file its annual SEC report preceded more merger trouble. Investigations uncovered a U.S. Department of Justice inquiry into the company’s alleged violations of the Foreign Corrupt Practices Act of 1977.
“The material misrepresentations and omissions occurred at a time when the individual defendants were actively seeking to sell Alere and, to that end, creating the illusion the company was thriving and had adequate financial and internal controls, while complying with its legal requirements concerning the proper billing of its services and not bribing foreign officials in violation of the Foreign Corrupt Practices Act,” the complaint read.
“With the enactment of certain amendments in 1998, the anti-bribery provisions of the FCPA now also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States,” according to the U.S. DOJ https://www.justice.gov/criminal-fraud/foreign-corrupt-practices-act.
In the meantime the SEC and Justice Department revelations drove down Alere’s valuation to $31.47 per share on July 27, from $55.39 per share on May 28, the class period proposed in the complaint.
Two high-level Alere defendants, Namal Nawana, chief financial officer, and James F. Hinrichs, former chief accounting officer, allegedly misrepresented the company’s business, finance and operations stood to gain $29 million each, according to the complaint.
The plaintiffs are demanding a jury trial in the complaint Godinez v. Alere Inc. et al., Case number 1:16-cv-10766, in U.S. District Court for the District of Massachusetts.