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

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, a urology practice with operations in39 states, is fighting the allegations made by hospital operato r and 29 former investors, all of whom claimn the practice lied to them during a 2007 share redemptio offer. The lawsuits allege Americaj Kidney Stone told investors it wantex to buy their shares to ensurew compliance with a federal law requiring investors bepracticing physicians. The company instead wanted to buythem out, the lawsuits so it could bring in practicing physicians as investorsz who would refer patients to its clinics, boostingt revenue.
“In truth, (the practice) is not only squeezing out non-activ e urologists, but also is squeezing out activelhypracticing urologists, and for one reasojn only – those members do not referr their patients to (its clinics),” the 29 investorz alleged in their June 3 “(American Kidney Stone) has no comment beyond sayingg that it regards the action as wholly withou t merit and it will be aggressively defended,” said Jack the company’s outside counsel with the law firm Joneds Day. Neither Newman nor practice representatives wouldcommentr further.
According to its Web American Kidney Stone was founded in 1984 and has grownj toa 1,500-physician network offerintg lithotripsy at clinics in 39 Lithotripsy uses shock waves to break up painful kidneyy stones. Kidney stones afflict 12 percent of Americanm men and 7 percentof women, according to a 2008 study publishesd in the Proceedings of the . The practice also provideas treatment for prostate and rena cancer and orthopedic shockwave treatment.
Like the lawsuift filed by the 29 OhioHealth claimed in its suit filed in December that Americahn Kidney Stone and its board approached some investors in Aprilp 2007 with a buyback offer that wouldpay $70 a They were given until May 4 to accept the offer, the lawsuit American Kidney Stone made the offer to urologistz who weren’t practicing and thosw who weren’t referring patients to its lithotripsy the lawsuit said. Meanwhile, the suit it was offering to sell sharesat $51 to practicing doctores who would send patientz to its clinics.
A year the company’s 13-member board passefd a measure that allowed it to changee its operating agreement so only activelyy practicing urologists couldbe investors, the lawsuitf said. The change also requireds all nonpracticing investors to sell their butat $54 a share, the lawsuit The investors’ lawsuit claimed American Kidneyh Stone shares were valued at $122 as late as 2006. Columbus-basedf OhioHealth, its political action committee and its ownexd acombined 24,400 shares. The 29 investors ownexd as manyas 60,0090 shares, said Kevin McDermott, their attornegy at Columbus-based .
“Aq lot of these folks are relying on this investment income for theirretirement years,” he said. “The company alwayss paid generous distributions.” OhioHealthb and the individual investors allege American Kidneh Stone broke its contract with investors by changingthe company’d operating agreement and that it breached its fiduciar y duty by selling shares to new investors for less than they were wortj and buying shares from former investors for less than fair market They are asking their ownership interests be reinstated and want American Kidney Stone to pay compensation in excess of $25,000, plus punitive damages.
McDermott is hoping the investor s will have their case decided in a relativelyt quick 18 months because he filer to have the case assigned toFranklin County’w new business docket, a specialized court designed to handle only corporate disputes. In an effor to increase the resolutionof business-to-businessa cases, the established specialized business docketss in Franklin, Hamilton and Cuyahoga countiees this year. The investors’ lawsuit also claims that by requirinvg practicing urologists tobe investors, Americann Kidney Stone could be violating federal laws designed to limit doctore referrals to clinics in whicb they have an ownership interest.