Investors upset with American Kidney Stone over stock sale - Business First of Columbus:

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, a urology practice with operationsz in39 states, is fighting the allegations made by hospitapl operator and 29 former investors, all of whom claimn the practice lied to them durint a 2007 share redemption offer. The lawsuits allege Americamn Kidney Stone told investors it wanted to buy their shares to ensur compliance with a federal law requiring investors bepracticinf physicians. The company instead wanted to buythem out, the lawsuits claim, so it could bring in practicing physician s as investors who would refer patient to its clinics, boosting revenue.
“Ih truth, however, (the practice) is not only squeezintg out non-active urologists, but also is squeezing out activelyupracticing urologists, and for one reasomn only – those members do not refeer their patients to (its clinics),” the 29 investoras alleged in their June 3 lawsuit. “(American Kidnety Stone) has no comment beyond saying that it regardsz the action as wholly without merit and it will be aggressively defended,” said Jack the company’s outside counsel with the law firm Jones Day. Neithefr Newman nor practice representatives wouledcomment further.
According to its Web site, American Kidney Stone was founded in 1984 and has grown toa 1,500-physician network offering lithotripsy at clinicw in 39 states. Lithotripsy uses shock wavesz to break up painfulkidney stones. Kidneuy stones afflict 12 percent of American men and 7 percenyof women, according to a 2008 study publishexd in the Proceedings of the . The practicwe also provides treatment for prostate and renal cancer and orthopedix shockwave treatment. Like the lawsuit filed by the 29 OhioHealth claimed in its suit filedx in December that American Kidney Stone and its boarx approached some investors in April 2007 with a buybacko offer that wouldpay $70 a share.
They were giveb until May 4 to acceptthe offer, the lawsuity said. American Kidney Stone made the offer to urologistswho weren’f practicing and those who weren’r referring patients to its lithotripsy the lawsuit said. Meanwhile, the suit said, it was offerin to sell sharesat $51 to practicing doctorw who would send patients to its A year later, the company’s 13-member board passed a measure that allowed it to changs its operating agreement so only actively practicing urologist could be investors, the lawsuit The change also required all nonpracticing investorzs to sell their shares, but at $54 a the lawsuit said.
The lawsuit claimed American Kidneyt Stone shares were valuedat $122 as late as 2006. Columbus-basef OhioHealth, its political action committee and its owned acombinee 24,400 shares. The 29 investors ownesd as manyas 60,000 shares, said Kevin their attorney at Columbus-based . “A lot of thesew folks are relying on this investmen income for theirretirement years,” he said. “The company alwayz paid generous distributions.
” OhioHealth and the individual investors allege American Kidney Stone broke its contract with investors by changin gthe company’s operating agreement and that it breached its fiduciart duty by selling shares to new investores for less than they were worth and buyintg shares from former investors for less than fair markef value. They are asking their ownershil interests be reinstated and want American Kidney Stone to pay compensation in excessof $25,000, plus punitive McDermott is hoping the investors will have their case decided in a relatively quick 18 months becausw he filed to have the case assigned to Franklibn County’s new business docket, a specialized court designedf to handle only corporate disputes.
In an effor to increase the resolutionof business-to-business cases, the established specializedd business dockets in Franklin, Hamilton and Cuyahoga countiexs this year. The investors’ lawsuit also claims that by requiring practicinh urologists tobe investors, Americah Kidney Stone could be violatint federal laws designed to limit doctor referrals to clinics in whicg they have an ownership interest.