According to a Business Wire article dated October 30, 2003, Pediatrix Medical Group, Inc. announced that all of the shareholder class action lawsuits that were filed in June and July of 2003 have been voluntarily dismissed without prejudice. The suits were filed following Pediatrix's June 24 announcement that a U.S. Attorney's Office is conducting an investigation into the Company's Medicaid billing practices nationwide.
The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between February 7, 2002 and June 23, 2003, thereby artificially inflating the price of Pediatrix common stock. The Complaint alleges that these statements were materially false and misleading because they
failed to disclose: (1) that the defendants engaged in fraudulent "upcoding" in its billing practices while telling the investing public that its billing practices were legitimate; and (2) Pediatrix materially inflated its Class Period financial results through inclusion of these fraudulent revenues. On June 24, 2003, the Company issued a press release with the headline: "Pediatrix Notified of Billing Inquiry." Contrary to defendants' public representations that its fraudulent billing practices were in the past, the Company announced that it had been advised by the U.S. Attorney's Office that it was conducting a civil investigation into Pediatrix's Medicaid billing practices nationwide. Additionally, the Company announced that the U.S. Attorney's Office intended to make a document and information request, within the next few weeks. Market reaction to the news was swift. Pediatrix's shares fell 24% or $9.90 per share, on unusually high trading volume, to close at $32.20 per share.