WILMINGTON, Del. (Legal Newsline) - Add a lawsuit filed last month by a Swiss doctor over the wrongful escheatment of his shares to the list of problems for Alere Inc., a Massachusetts-based diagnostics company.
Dr. Christian Schmidt, who resides in Engelberg, Switzerland, filed his lawsuit against Alere and Australian-headquartered Computershare Limited in the U.S. District Court for the District of Delaware Jan. 27.
Schmidt filed the lawsuit by and through his attorneys, Chicago-based Goldstein & McClintock LLLP and the Jayaram Law Group Ltd.
“Despite the fact Alere and/or Computershare maintained Dr. Schmidt’s current and correct address, telephone number, and email address, it only (allegedly) attempted to contact him on three (3) different occasions regarding the status of his 11,931 shares,” the plaintiff alleges in his seven-page complaint.
“Despite the fact that Alere and/or Computershare knew Canaccord maintained Dr. Schmidt’s current and correct address, telephone number, and email address, they completely failed to notify Dr. Schmidt through Canaccord of the status of his shares in Alere.
“The Defendants’ actions, or lack thereof, resulted in direct harm to Dr. Schmidt and was done without regard to Dr. Schmidt’s rights under Delaware law.”
In 2008, Schmidt acquired 11,931 shares in Alere, and held those shares until, he claims, they were wrongfully escheated, or seized by the state, on Feb. 5, 2013.
Computershare acted as Alere’s transfer agent and was responsible for ensuring that shareholder entitlements are accurately managed and recorded, Schmidt claims. Schmidt said he retained Canaccord Genuity Inc. to act as his broker, responsible for monitoring his shares of Alere.
Schmidt alleges Alere and/or Computershare, without notice, escheated his shares to the state of Delaware.
Once the shares were escheated, the state sold his shares for about $350,000.
“Alere and/or Computershare failed to notify Dr. Schmidt that his shares had been escheated to the State of Delaware,” the plaintiff wrote. “Thereafter, in 2015, Dr. Schmidt attempted to sell his shares of Alere. At that point, for the first time, he was advised and learned that these equities were escheated to the State of Delaware on February 5, 2013.”
Despite making a written demand to rectify the situation, Alere was unwilling, Schmidt claims.
“Accordingly, Dr. Schmidt followed certain Delaware statutory procedures and was able to recover the $350,000 that resided with the State as a result of the wrongful escheatment,” he wrote. “This recovery, however, does not make Dr. Schmidt whole because he intended to sell his shares at a time when the stock price of Alere was substantially higher.”
Schmidt seeks exemplary damages, punitive damages and an order requiring Alere to pay him damages in excess of $300,000.
Recently, Arriva, a subsidiary of Alere, disclosed that it submitted Medicare claims on behalf of 211 deceased patients over a five-year period. The Centers for Medicare & Medicaid Services, or CMS, responded by revoking the company’s Medicare enrollment.
It’s part of a recent string of events that has jeopardized Alere’s merger with Abbott Laboratories.
Arriva has filed an appeal with a CMS administrative law judge in an effort to have its Medicare enrollment reinstated. The company also has asked the Washington, D.C., federal court, to put a stay on the revocation while the appeal of it is pending.
In a December complaint, the company claims it was targeted by CMS in an effort to reduce a backlog at the agency.
“(T)he decision by CMS to bar Arriva from participating in Medicare is driven by a desire to reduce its longstanding backlog of administrative claim-reimbursement appeals,” Alere says.
“Arriva notes that the court recently ordered CMS to clear that backlog by 2020, and… CMS perceives Arriva to be a contributor to that backlog because Arriva has been forced to appeal approximately 25,000 errantly denied claims over the past five years.”
The company expects the CMS administrative law judge to issue a decision in the next few months.
In response to the lawsuit, the U.S. Department of Health and Human Services has asked the court to dismiss Arriva’s complaint.
Meanwhile, Abbott has asked a Delaware Chancery Court to terminate its proposed merger with Alere because, it says, the company has been so poorly run that it no longer resembles its former self.
Among its chief concerns is the Arriva Medicare-billing situation. Other issues:
- An effort by the company to conceal pertinent information from Abbott;
- The voluntary recall of INRatio monitoring systems in July and subsequent lawsuits that blame INRatio for injuries and 16 deaths;
- Multiple government subpoenas, two of which are criminal; and
- Admissions of internal control failures requiring a restatement of three years of previous financials.
When the merger was signed on Jan. 30, 2016, Alere’s stock stood at $56 per share -- the price to which Abbott agreed to pay shareholders. As of Dec. 13, its stock price was $37.85 per share.
The stock drop also has led to at least one lawsuit brought by shareholders who blame executives at the company.
“Neither Abbott nor any reasonable acquirer would have agreed to the deal had it known Alere would be subject to such material long-term problems as the result of systemic internal control failures,” the Abbott complaint says.
Alere has said Abbott’s lawsuit is entirely without merit.
“As Abbott well knows, none of the issues it has raised provides it with any grounds to avoid closing the merger,” the statement says.
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.