Oh, Guidant. When it rains, it pours. Bloomberg.com reports that Beverly Lorell, Guidant’s medical chief, off-loaded $3.3M in stock (95% of her stake in the company) in the days preceding the first round of letters to doctors regarding the now infamous failures of their difibrillators. While this investigation is into Lorell’s actions (as opposed to the Guidant Corp.), it could provide evidence supporting Johnson and Johnson’s claim that there has been “material adverse change” in the status of the company when a top exec is purging their portfolio.
Guidant, whose $25.4 billion acquisition by Johnson & Johnson is in jeopardy, said Nov. 7 the SEC is investigating trading in the company’s shares and product disclosures. Beverly Lorell, Guidant’s medical chief since 2003, sold the shares in the six days before doctors began to receive letters about the failures. The announcement led to the recall of 109,000 devices and a 14 percent decline in the shares in a month.
“The SEC is always concerned when you have an executive selling a large position in a period immediately before a material adverse announcement,” said Stephen Bainbridge, a University of California at Los Angeles law professor who specializes in securities law, in an interview yesterday.
Lorell, who is on leave from her post as a Harvard Medical School professor, declined in a telephone interview to comment about the sale, referring questions to Guidant’s spokesman Steve Tragash. The sales, which took place on May 17 and 23, amounted to 95 percent of her holdings in the company at that time.
“I don’t have any comment on any of the executives’ stock trades,” Tragash said. “As you know, the SEC has opened up an investigation which we announced Monday, and we’re not going beyond that.”
Link to Guidant’s “Newsroom” Page…