Boston Scientific Securities Litigation

On February 15, 2006, the Honorable Joseph L. Tauro consolidated five related lawsuits filed in the District of Massachusetts on behalf of all persons who purchased Boston Scientific securities between March 31, 2003 and August 23, 2005 (“Class Period”). The Court appointed Zimmerman Reed as Lead Counsel for the putative Class.

The consolidated action alleges Boston Scientific Corporation (“Boston Scientific” or “Company”), a company that engages in the manufacturing of a variety of medical devices primarily used in interventional medical specialties, and nine of its officers and/or executives violated provisions of the Securities and Exchange Act of 1934. Specifically, the Defendants misrepresented and concealed the following material facts about the Company from the investment community:

The Medinol Litigation: In litigation brought by the Company's stent supplier (Medinol), the Defendants repeatedly told investors during the Class Period that the lawsuit had “no merit,” despite the fact that Defendant Tobin admitted in a private meeting with Medinol that the officers of Boston Scientific had engaged in inappropriate conduct and were “crooks.” Ultimately, the Company paid $750 million to settle those “meritless” claims in 2005.
The Department of Justice Investigation: While overwhelming evidence of the Company's misconduct was being presented by witness after witness to a grand jury empanelled by the Department of Justice, the Defendants repeatedly lied to the investing public during the Class Period by insisting that they had acted “responsibly” and “appropriately” in connection with a product recall which occurred in 1998. The conduct was hardly “responsible” as it ultimately cost the Company $74 million to settle the charges in 2005.
The TAXUS Ò Problems. When the Company was about to introduce a new product, TAXUS Ò Express Paclitaxel-Eluting Monorail® Coronary Stent System (“TAXUS”), the Defendants repeatedly pumped it to investors as a wonder medical device while knowing that the product was fraught with problems and was being released prematurely. Ultimately, TAXUS was recalled, leading to a plummeting of the market price of the Company's stock in 2004.
The FDA Investigations and Warnings. When the Food and Drug Administration (“FDA”) sent the Defendants three separate warning letters (“Warning Letters”) in 2005 advising them that the Company's plants failed to meet FDA quality standards, the letters were never provided to the investing public by the Defendants. Ultimately, the Company would be subject to a corporate-wide warning letter from the FDA. As the news of the FDA regulatory action slowly leaked out, the market price of the Company's stock dropped.

As a result, these alleged actions artificially inflated the price of Boston Scientific securities, thereby damaging investors who purchased or otherwise acquired securities during the Class Period. While the Company's stock was trading at artificially inflated prices, insiders sold their personal holdings and enriched themselves in excess of $332 million.