Another company is suing Scott Sacane over the inexplicable trading activity of his beleaguered
Durus Capital Management
became the third health care company to file a lawsuit that seeks to recover any "short-swing" trading profits generated by Durus in the company's shares.
Novoste is bringing the lawsuit under a seldom-invoked securities law, Section 16-b of the Securities Exchange Act of 1934, which prohibits big holders of a stock from profiting on short-term trades. The complaint doesn't specify how much money the company believes it's entitled to.
A spokesman for Sacane declined to comment.
The lawsuit is similar to ones filed during the summer by
, after Sacane belatedly disclosed in July that Durus had acquired huge equity stakes in both companies over the past year. At last count, Durus owned a 29% stake in Esperion and a 77% stake in Aksys.
Securities and Exchange Commission
has opened an investigation into Durus trading activity in Aksys and Esperion, which Sacane has blamed on "inadvertent" trades. In addition, some of the hedge fund's investors have rebelled against Sacane and replaced his handpicked board of directors with members of their own choosing.
To date, Durus' trades in Novoste have garnered less attention, mainly because the hedge fund's equity stake in the stock never rose much above 10%. But at 10%, Durus owned enough Novoste shares to trigger the prohibition against short-swing trades by major stockholders.
The lawsuit contends Durus crossed the 10% threshold on Oct. 28, 2002, but that the company did not learn of that fact until this August, after Sacane and Durus submitted a flurry of ownership filings with the SEC.
In recent months, Durus has been selling shares in Novoste, after signing agreements with Aksys and Esperion that prohibit Sacane from selling shares for several months. As of Aug. 20, according to the latest available information, Durus owned 633,000 shares, or 3.8%, of Novoste's outstanding stock, compared with 1.74 million shares, or 10.6%, just five months earlier.
Since the end of March, shares of Novoste, a manufacturer of a device used to unclog arteries, have fallen to $4.80 a share from $9. Novoste is a thinly traded stock, with generally no more than 111,000 shares changing hands each day.
There's still no word on whether
( ALTH), a manufacturer of a cancer therapy drug, also will follow suit and sue Durus and Sacane over its short-swing trades. Earlier this year, Durus owned as much as 23%, or 5.9 million shares, of the company's stock. But by the end of June, its holding had been reduced to just over 15%.