A Medical Device Daily

Anuradha Saad, former CEO and chairman of Impath (New York), and Richard Adelson, the company's former president/chief operating officer, have consented to final judgments against themselves, the U.S. Securities and Exchange Commission has reported.

An interesting back story to the actions is the reduction of jail time for Adelson of 85 years, originally sought by prosecutors, to 42 months, a judge calling the 85-year term overly draconian.

Requests for disgorgement and civil penalties against Adelson were withdrawn in view of the 42-month prison term, $1.2 million in civil forfeiture and $50 million in restitution as a result of his conviction earlier this year in a parallel criminal case.

Saad must pay $2,055,047, consisting of more than $1.9 million in disgorgement, prejudgment interest and a $150,000 civil penalty.

The complaint named Saad, Adelson and five other former Impath executives as defendants: David Cammarata, Impath CFO; Peter Torres, vice president, corporate finance; Robert McKie, a divisional vice president; Karin Gardner, controller; and Kenneth Jugan, national billing director.

The complaint charges that the defendants cooked Impath's books to make it appear that the company - formerly providing lab services in cancer treatment - made multimillion dollar profits rather than suffering large losses.

Impath filed for bankruptcy in September 2003 (Medical Device Daily, Sept. 30, 2003) and is being liquidated. The company received word of the SEC's investigation earlier that month.

Saad, Adelson and Cammarata, the SEC said, used corporate funds to pay for stock options without board approvals or the necessary disclosures. Saad is required to disgorge gains of $352,000 in stock option exercise costs that she paid with corporate funds, $990,537 from her sales of Impath stock and $220,000 in severance pay.

Adelson was tried before a jury, and in February was convicted on multiple counts of conspiracy, securities fraud, and filing false reports. Prosecutors sought jail time of 85 years, but a judge reduced that to 42 months, calling the sentencing guidelines "patently unreasonable."

Adelson also must forfeit $1.2 million and pay restitution of $50 million.

The proposed 85-year sentence sought was called by the judge "an utter travesty of justice that sometimes results from the guidelines' fetish with abstract arithmetic, as well as the harm that guideline calculations can visit on human beings if not combined by common sense." He said the conspiracy was likely concocted by various accounting executives and employees who were under pressure from Saad.

Saad previously pled guilty to two felony counts of solicitation of proxies with false proxy statements, and one count of failure to implement an adequate system of internal controls. She was sentenced to three months in prison, followed by two years of supervised release, and ordered to pay a $6,900 fine.

Cammarata, Torres, Gardner and Jugan previously pled guilty to various counts of securities fraud, and in June, they were each sentenced to pay, jointly and severally, restitution of $50 million. Cammarata was sentenced to one month in prison.

In July, the commission withdrew its requests for disgorgement and civil penalties against Cammarata, Torres, Gardner, and Jugan in view of the sentences imposed on them in the criminal case.

In other legalities, The

Los Angeles Times reported this week that nearly 30 lawsuits have been filed against DePuy Spine (Raynham, Massachusetts), maker of the Charite artificial disc, used to replace a failed natural disc, with the lawsuits saying that the patients had worsened back problems as a result of Charite implantation.

The newspaper reports the claims of a Bakersfield, California, maintenance manager who says he has been virtually immobilized after the implant and, as a result, lost his job. His suit claims the disc to be "unreasonably dangerous."

It also reports that a foot and ankle surgeon - who also competed in marathons - could no longer perform the activities of her practice and has sued the company.

Used in Europe since the 1980s and approved by the FDA in 2004 (Medical Device Daily, Oct. 28, 2004), the Charite disc is part of the growing - but controversial - surgical approach used as an alternative to traditional spine fusion.

A variety of the plaintiffs criticize the company's claim, posted on its web site, that the Charite is able to return "natural motion" to someone suffering disc damage.
The company has responded with documentation of many successful operations, while noting the risk of adverse results.

Those adverse results were underlined this year by a report from the Centers for Medicare & Medicaid Services , questioning the device's effectiveness and turning down the request for reimbursement.