Shareholders allege they were shortchanged by St. Jude

Two lawsuits against St. Jude Medical Inc. allege that shareholders have been shortchanged as the medical device company spends time and resources fending off litigation over alleged kickbacks to doctors and hospitals.

The suits were filed recently in U.S. District Court in Minnesota against the Little Canada-based company; some executives, including CEO Daniel Starks; and board members by an individual shareholder from Pennsylvania named Cindy Henzel, and by the Louisiana Municipal Police Employees' Retirement System. The text of the suits is similar.

Both complaints cite federal court cases brought by former St. Jude employees under federal whistleblower laws alleging that the company engaged in illegal behavior and, as a result, "tainted the treatment of many cardiac patients and subjected seriously ill patients to unnecessary medical procedures."

The goal of the shareholder action, court documents state, "is to prevent corporate insiders from shifting all responsibility for the company's misconduct onto the backs of the innocent public shareholders, while they themselves walk away while paying nothing, and even voting themselves increased salaries and benefits."

The suits allege breach of fiduciary duty and charge Starks with "unjust enrichment." They seek a judgment against St. Jude that would include an undetermined amount of damages, restitution and other costs.

St. Jude spokeswoman Amy Jo Meyer characterized the lawsuits as "substantially identical. The allegations raised in these cases are baseless and without merit. The company plans to vigorously defend against these claims"

With $4.7 billion in annual revenue, St. Jude markets pacemakers, heart defibrillators and valves, and other products.

That lawsuit, filed in 2007 by former St. Jude sales manager Jerry Hudson, "demonstrates the widespread nature of the illegality within St. Jude," the shareholders allege.

St. Jude agreed in June to pay a $3.7 million fine to settle the case with the federal government, but denied any wrongdoing in the matter.

The second case cited in the shareholder lawsuit still is pending in Massachusetts federal court.

In that matter, a former technical service specialist at St. Jude named Charles Donigan claims the company paid for bogus studies tracking devices once implanted in patients, and lavished doctors with free travel and tickets to sporting events and concerts as a way of encouraging them to buy its products.

Whistleblower lawsuits, filed under the Civil False Claims Act, allow a private person to sue a company that knowingly submitted false bills to the government -- in this case, to Medicare and Medicaid, the government's health plans for the elderly and poor.

After a five-year investigation, the federal government in August moved to intervene in the Donigan case, which could result in charges against St. Jude.