FRAUD ALLEGATIONS Overview Part 1
Following are excerpts from the law suit filed against SBTK.
We believe the sources for these allegation include persons directly involved in the transactions, including persons who may have been under oath during deposition. We also believe these allegations have been corroborated by several sources.
We are substantially impressed by the detailed nature of the allegations, which include times, dates, persons involved and equipment involved.
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Prior to the Class Period, the Company reported exceptional revenue growth which resulted in a dramatic increase in the price of its common stock, and throughout the Class Period the defendants continued to portray Sabrateck as a leader in its industry and as a company that was experiencing and would continue to experience rapidly rising sales and profits on its core products and new product offerings.
5. However, as Sabratek's officers and directors knew but did not disclose, during the Class Period the Company's Rocap division was at serious risk of being shut down by the FDA because, inter alia, the company was selling its Rocap line of syringes without a valid pre-market 510 (k) approval from the FDA, as required by federal law. Rocap's operations also had a long history of FDA compliance problems that rendered the Company's ability to obtain the requisite 510(k) approvals highly problematic and doubtful. For example, prior to the start of the Class Period, in August 1997 the FDA had informed Sabratek that it had placed a “hold” on its 510 (k) application for Rocap syringes-and in December 1997 the FDA sent a warning Letter (the “December 1997 Warning Letter”) to Sabratek's CEO (defendant Shan Padda) informing the Company that it was manufacturing Rocap syringes in violation of federal law and FDA-mandated safety and quality- control requirements, and that the Company was at risk of, inter alia, having its facilities seized if it continued to violate applicable laws and regulations. However, rather than disclose the true nature and extent of the adverse facts relating to the Company's Rocap operations, throughout the Class Period defendants repeatedly misled the investing public by misrepresenting, inter alia that the Company was in compliance with applicable FDA regulations, that it maintained “comprehensive quality assurance program (s),” that the FDA had no ongoing concerns about the safety of its Rocap products, and that the Company's Rocap revenues would steadily increase.
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