BRIDGEPORT, Conn. (HedgeWorld.com)–A short seller, Hal O. Collier, has brought a complaint in the federal district court for Connecticut against Scott Sacane, the hedge fund manager who bought a majority stake in two health care industry companies last year without having made the required Securities and Exchange Commission filings.
Mr. Collier’s complaint, filed July 19, asks the court to order this suit maintained as a class action with the plaintiff class to consist of “all persons and entities who sold short shares of [Aksys Ltd.] at any time from January 2003 through July 24, 2003 and suffered damages thereby” except for persons or entities associated with the defendants: Mr. Sacane, his fund Durus Life Sciences Master Fund Ltd., its management company and Aksys itself.
The plaintiff alleges that the revelation of certain defendants’ previously concealed purchases and ownership levels in Aksys last July caused an increase in the price of Aksys that did damage to class members in that they would not have sold short had the truth been disclosed properly (see Previous HedgeWorld Story).
Aksys, of Lincolnshire, Ill., was one of two companies in which Durus, a long/short equity hedge fund with a special interest in the health care industry, acknowledged an outsized accidental accumulation at that time–the other was Esperion Therapeutics Inc., Ann Arbor, Michigan. The lawsuit filed on Mr. Collier’s behalf by attorneys Patrick Lennon, Southport, Conn., and Lee Squitieri, New York, makes no mention of Esperion.
Aksys offers dialysis-related products. In a filing with the Securities and Exchange Commission Aug. 9, Aksys said that it believes “that all of the claims against Aksys are without merit and we intend to defend them vigorously.” A spokesman for Mr. Sacane declined to comment.
Actually, the complaint bears some marks of having been hastily drafted in an effort to file ahead of the statute of limitations. For example, although Aksys is named as a defendant in the caption, there is no discussion in the body of the text that would seem to lay any basis for Aksys’ liability in the allegedly fraudulent purchases of its stock. Furthermore, the heading of count three of the complaint refers to a “Defendant Redstone,” although no person or entity named “Redstone” is named in the caption or even in the body of count three.
Mr. Squitieri said Aug. 13 he is “open-minded as to whether Aksys should continue to be a party to this case,” but he had to protect his client’s position in regard to the statute of limitations. He added that under the law, Aksys may be liable on the basis of its settlement with the other defendants. Specifically, in January 2004 Aksys received US$4.5 million from Durus for settling claims under ?16(b) of the Securities Exchange Act of 1934, and in February 2004 it received another payment of US$48.7 million for settling all other claims. The February settlement agreement included the purchase by certain defendants of US$16.1 million of unsecured subordinated promissory notes.
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