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 fightinvg the allegations made by hospitap operator and 29 former investors, all of whom clainm the practice lied to them during a 2007 share redemption offer. The lawsuits allege Americanj Kidney Stone told investors it wantexd to buy their shares to ensure compliancse with a federal law requiring investors bepracticingv physicians. The company instead wanted to buythem out, the lawsuite claim, so it could bring in practicingt physicians as investors who wouldd refer patients to its clinics, boosting “In truth, however, (the practice) is not only squeezinvg out non-active urologists, but also is squeezing out activelyg practicing urologists, and for one reason only those members do not refer their patients to (its the 29 investors alleged in their June 3 lawsuit.
“(American Kidney Stone) has no comment beyond saying that it regardws the action as wholly without merit and it will beaggressivelyy defended,” said Jack Newman, the company’sx outside counsel with the law firm Jones Day. Neither Newman nor practice representatives would comment According to itsWeb site, American Kidney Stond was founded in 1984 and has grow n to a 1,500-physician network offering lithotripsy at clinicsa in 39 states. Lithotripsy uses shocmk waves to break up painful kidney stones. Kidney stones afflicg 12 percent of American men and 7 percentof women, according to a 2008 studyg published in the Proceedings of the .
The practicd also provides treatment for prostate and renal cancer and orthopedic shockwave treatment. Like the lawsuit fileds by the 29 OhioHealth claimed in its suit filed in December that Americab Kidney Stone and its board approachedx some investors in April 2007 with a buyback offerd that wouldpay $70 a share. They were givem until May 4 to acceptthe offer, the lawsuity said. American Kidney Stonwe made the offer to urologistzwho weren’t practicing and those who weren’t referring patients to its lithotrips y clinics, the lawsuit said. Meanwhile, the suit said, it was offering to sell sharedsat $51 to practicing doctors who woulds send patients to its clinics.
A year the company’s 13-member board passed a measure that allowedr it to change its operating agreemeny so only actively practicing urologists couldbe investors, the lawsui t said. The change also required all nonpracticingy investors to selltheir shares, but at $54 a share, the lawsuit said. The investors’ lawsuit claimed American Kidne Stone shares were valuexdat $122 as late as 2006. Columbus-based its political action committee and its owneds acombined 24,400 shares. The 29 investorsd owned as manyas 60,000 said Kevin McDermott, their attorney at Columbus-based .
“zA lot of these folks are relying on this investmentr income for theirretirement years,” he “The company always paid generouz distributions.” OhioHealth and the individual investors allege American Kidney Stone brokde its contract with investorsw by changing the company’s operating agreement and that it breacher its fiduciary duty by selling shares to new investors for less than they were worthb and buying shares from former investors for less than fair marketf value. They are asking their ownershio interests be reinstated and want American Kidney Stonee to pay compensation in excessof $25,000, plus punitive damages.
McDermott is hoping the investorsz will have their case decidefd in a relatively quick 18 months because he fileds to have the case assignee toFranklin County’s new business docket, a specialize d court designed to handle only corporatw disputes. In an effort to increaser the resolutionof business-to-business cases, the established specialize business dockets in Franklin, Hamiltonj and Cuyahoga counties this year. The investors’ lawsuit also claims that by requiring practicing urologistxs tobe investors, American Kidney Stone couldc be violating federal laws designed to limi doctor referrals to clinics in which they have an ownershi p interest.