FRAUD ALLEGATIONS Overview #4
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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11. Meanwhile, without publicly disclosing the true and adverse material facts regarding the Company's regulatory compliance, financial performance, fraudulent revenue-recognition practices and future prospects, the Individual Defendants did not hesitate to take advantage of the lack of public disclosure of the truth by selling over $5 million of their personal holdings of Sabratek common stock to members of the Class at artificially inflated prices during the Class Period.
12. Although Sabrateck embarked on its fraudulent scheme to conceal its Rocap-related regulatory problems and its deteriorating sales and other problems by no later than the beginning of the Class Period (January 13, 1998), the market did not begin to learn of the extent of Sabratek's severely weakened financial condition and deteriorating value until November 1998, when (a) certain market analysts published reports questioning the Company's financial performance, including its declining gross margins, high level of receivables and high inventory levels; and (b) the Company announced that it was suspending the distribution of its Rocap flush syringe product line following “discussions” with the FDA regarding the status of Sabratek's pending 510 (k) application for FDA approval of these products.
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