The original complaint first filed in the U.S. District Court for the Southern District of New York charges Bausch & Lomb and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Bausch & Lomb engages in the development, manufacture, and marketing of eye health products.
Specifically, the complaint alleges that during the Class Period, defendants made positive but false statements about Bausch & Lomb’s results and business, while concealing material adverse information about the true nature of the Company’s revenues, the lack of adequate internal controls and the underpayment of taxes resulting in tens of millions of dollars in penalties, which ultimately resulted in the restatement of the Company’s financials over a period of five years.
The complaint further alleges that on or around December 22, 2005, after the markets closed, the Company provided an update on an internal investigation related to its Brazil subsidiary and announced that it would restate its financial results for 2000 through the first half of 2005. On this disclosure, Bausch & Lomb’s stock price dropped to as low as $71.54 per share, a 9% decline from its close on December 22, 2005 – the equivalent of a $374 million market capitalization loss. However, according to the complaint, prior to these revelations of accounting fraud the Company’s top officers and directors illegally reaped over $29 million in insider trading proceeds.
A class action complaint was filed on May 12, 2006, in the U.S. District Court for the Eastern District of New York, alleging that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by issuing materially false and misleading statements during the Class Period which caused Bausch & Lomb shares to trade at artificially inflated prices. These statements were allegedly materially false and misleading when made because defendants failed to disclose that: (a) one of the Company's lead products, ReNu(R) with MoistureLoc(R) ("ReNu"), was strongly linked to eye infections; (b) quality control issues, including at the Company's Greenville, South Carolina plant, where ReNu is manufactured, existed and were not fully and properly addressed; and (c) the disproportionate number of Fusarium keratitis cases involving Renu users would result in increased scrutiny of the Company by both the FDA and CDC which could require a removal of the product from the market. On July 11, 2006, a letter was filed advising the Court that the plaintiff voluntarily dismisses the action without prejudice to pursue claims in the Western District of New York where other cases against the defendants are pending.
As summarized by the Company’s FORM 10-Q for the quarterly period ended June 30, 2007, there is a consolidated securities class action, entitled In re Bausch & Lomb Incorporated Securities Litigation, Case Nos. 06-cv-6294 (master file), 06-cv-6295, 06-cv-6296, and 06-cv-6300, pending in Federal District Court for the Western District of New York, Rochester Division, against the Company and certain present and former officers and directors. Initially, four separate shareholder actions were filed between March and May of 2006 in Federal District Court for the Southern District of New York, and these were later transferred to the Western District of New York and consolidated into the above-captioned matter. Plaintiffs in these actions purport to represent a putative class of shareholders who purchased Company stock at allegedly artificially inflated levels between January 27, 2005 and May 3, 2006. Among other things, plaintiffs allege that defendants issued materially false and misleading public statements regarding the Company's financial condition and operations by failing to disclose negative information relating to the Company's Brazilian and Korean subsidiaries, internal controls, and problems with our MoistureLoc multipurpose solution (MoistureLoc), thereby inflating the price of Company stock during the alleged class period. Plaintiffs seek unspecified damages. On July 13, 2007, the Court entered an order appointing a lead plaintiff and lead counsel.
On January 7, 2008, the lead plaintiffs Ironworkers St. Louis District Council Pension Fund and Structural Ironworkers Local Union #1 Annuity, Pension and Welfare Funds filed a Consolidated Amended Complaint. The defendants responded by filing a motion to dismiss the Consolidated Amended Complaint on March 7, 2008. On November 13, 2008, the Honorable Michael A. Telesca issued the Order granting the motion to dismiss. On November 17, 2008, the Court entered the Judgment dismissing the plaintiffs’ complaint with prejudice.
On December 15, 2008, the lead plaintiffs filed a notice of appeal as to the Judgment dismissing the case. On March 5, 2009, the Court entered the Mandate from the U.S. Court of Appeals. The appeal was dismissed with prejudice. On April 21, 2009, a movant filed a motion for reconsideration of the Order and Judgment dismissing the case. That motion was denied on April 28, 2009.
On August 26, 2010, a notice of appeal was filed by another movant as to the order on the motion for reconsideration. Finally, on February 8, 2011, the Court entered the Mandate from the U.S. Court of Appeals, dismissing the appeal.