Orthofix International N.V.(the Company) announced today that the Chairman of the Company’s Board of Directors, James F. Gero, sent a letter, included below, to Ramius LLC raising concerns about another of Ramius’s nominees for Orthofix’s Board of Directors.
Jeffrey Smith
Ramius Capital
599 Lexington Ave.
New York, NY 10022
Dear Mr. Smith:
I am writing to you on behalf of the Board of Directors of Orthofix International to question your nomination of Steven J. Lee to our Board. We wish to register our concern about the perception that might be created by Mr. Lee’s presence on our Board.
Based on publicly available documents we understand that Mr. Lee founded PolyMedica Corporation, a Massachusetts-based medical products company, where he served as President, CEO and Chairman of the Board from 1990 to 2002. In 1998, during Mr. Lee’s tenure, the federal government began an investigation of PolyMedica’s Florida-based subsidiaries, Liberty Medical Supply and Liberty Home Pharmacy. In 2001 two qui tam, or whistleblower, lawsuits were filed in federal court in Miami and Boston against PolyMedica Corporation and its subsidiaries. These lawsuits alleged, among other things, that the subsidiaries violated the False Claims Act by submitting claims to Medicare without proper documentation of medical necessity, resulting in overbilling to federal health care programs.
In 2002, Mr. Lee left PolyMedica after a Medicare fraud investigation was initiated by the United States Department of Justice against the company. In 2004, after Mr. Lee’s departure, PolyMedica paid a $35 million settlement to the United States government to resolve these civil allegations, as well as to settle administrative sanctions related to the alleged misconduct. This settlement concluded an investigation lasting approximately five years that included onsite searches of PolyMedica’s subsidiary operations by FBI agents in response to federal search warrants, the removal of company documents, and subsequent shareholder lawsuits.
Frankly, we are concerned that Mr. Lee’s presence on our Board would detract from the positive steps we have taken related to Orthofix’s recent implementation of Integrity Advantage™, our Corporate Compliance and Ethics Program. This program incorporates industry best practices for compliance, and is structured to meet U.S. Sentencing Commission Guidelines for effective organizational compliance and ethics programs. Under the leadership of the company’s new Senior Vice President and Chief Compliance Officer, a health care attorney with significant regulatory compliance experience whose hiring was approved by the Board, Orthofix’s Integrity Advantage program is designed to promote compliance with the highest level of legal and ethical business practices throughout the company’s domestic and international businesses.
As you know, our compliance function is not the only part of the company we have improved. On December 15th 2008, Orthofix announced that the company and its partner, the Musculoskeletal Transplant Foundation (MTF), had achieved a major milestone in their efforts to develop a new stem cell-based allograft. Orthofix also initiated the limited market release of two new products, the Firebird™ pedicle screw system and the PILLAR™ SA interbody device, both of which are expected to be fully launched in the first quarter of 2009. Two weeks later, Orthofix made a $10 million partial debt repayment, ahead of the scheduled maturity date, which increased the company's flexibility in executing its operating plan. It is the Board’s judgment that additional positive developments are on the near term horizon for Orthofix, including its Blackstone subsidiary.
On January 28th, I sent you a letter questioning the nomination of Peter Feld, a 29-year-old Ramius nominee and employee with no health care experience and a strikingly thin (and disconcerting) record of service on just two Boards: Sharper Image, an American retailing icon which filed for bankruptcy and eventual liquidation shortly after Mr. Feld’s departure, and CPI Corp, recently threatened with delisting by the New York Stock Exchange. Particularly in a difficult operating environment, it is unclear what value either Mr. Lee or Mr. Feld would bring to our business. Frankly, the Board is deeply troubled by the respective backgrounds of both Mr. Lee and Mr. Feld, as well as Ramius’s efforts to impose these two people on our team, our culture and our organization.
In addition to Mr. Lee and Mr. Feld, Ramius has also nominated Charles T. Orsatti and J. Michael Egan to our Board. While we think Mr. Lee and Mr. Feld offer no obvious benefit to our broad shareholder base, and would clearly damage our Board and the reputation of our company, we are prepared to formally meet and interview both Mr. Orsatti and Mr. Egan at the earliest available date.
Sincerely,
James F. Gero
Chairman, Board of Directors
Orthofix International NV
cc: Orthofix Board of Directors
About Orthofix
Orthofix International, N.V., a global medical device company, offers a broad line of minimally invasive surgical, and non-surgical, products for the spine, orthopedic, and sports medicine market sectors that address the lifelong bone-and-joint health needs of patients of all ages–helping them achieve a more active and mobile lifestyle. Orthofix’s products are widely distributed around the world to orthopedic surgeons and patients via Orthofix’s sales representatives and its subsidiaries, including BREG, Inc. and Blackstone Medical, Inc., and via partnerships with other leading orthopedic product companies. In addition, Orthofix is collaborating in R&D partnerships with leading medical institutions such as the Orthopedic Research and Education Foundation, Rutgers University, the Cleveland Clinic Foundation, Texas Scottish Rite Hospital for Children and National Osteoporosis Institute.
Contact:
Orthofix International, N.V.
Dan Yarbrough, 617-912-2903
Vice President of Investor Relations
danyarbrough@orthofix.com
via yahoo
Jeffrey Smith
Ramius Capital
599 Lexington Ave.
New York, NY 10022
Dear Mr. Smith:
I am writing to you on behalf of the Board of Directors of Orthofix International to question your nomination of Steven J. Lee to our Board. We wish to register our concern about the perception that might be created by Mr. Lee’s presence on our Board.
Based on publicly available documents we understand that Mr. Lee founded PolyMedica Corporation, a Massachusetts-based medical products company, where he served as President, CEO and Chairman of the Board from 1990 to 2002. In 1998, during Mr. Lee’s tenure, the federal government began an investigation of PolyMedica’s Florida-based subsidiaries, Liberty Medical Supply and Liberty Home Pharmacy. In 2001 two qui tam, or whistleblower, lawsuits were filed in federal court in Miami and Boston against PolyMedica Corporation and its subsidiaries. These lawsuits alleged, among other things, that the subsidiaries violated the False Claims Act by submitting claims to Medicare without proper documentation of medical necessity, resulting in overbilling to federal health care programs.
In 2002, Mr. Lee left PolyMedica after a Medicare fraud investigation was initiated by the United States Department of Justice against the company. In 2004, after Mr. Lee’s departure, PolyMedica paid a $35 million settlement to the United States government to resolve these civil allegations, as well as to settle administrative sanctions related to the alleged misconduct. This settlement concluded an investigation lasting approximately five years that included onsite searches of PolyMedica’s subsidiary operations by FBI agents in response to federal search warrants, the removal of company documents, and subsequent shareholder lawsuits.
Frankly, we are concerned that Mr. Lee’s presence on our Board would detract from the positive steps we have taken related to Orthofix’s recent implementation of Integrity Advantage™, our Corporate Compliance and Ethics Program. This program incorporates industry best practices for compliance, and is structured to meet U.S. Sentencing Commission Guidelines for effective organizational compliance and ethics programs. Under the leadership of the company’s new Senior Vice President and Chief Compliance Officer, a health care attorney with significant regulatory compliance experience whose hiring was approved by the Board, Orthofix’s Integrity Advantage program is designed to promote compliance with the highest level of legal and ethical business practices throughout the company’s domestic and international businesses.
As you know, our compliance function is not the only part of the company we have improved. On December 15th 2008, Orthofix announced that the company and its partner, the Musculoskeletal Transplant Foundation (MTF), had achieved a major milestone in their efforts to develop a new stem cell-based allograft. Orthofix also initiated the limited market release of two new products, the Firebird™ pedicle screw system and the PILLAR™ SA interbody device, both of which are expected to be fully launched in the first quarter of 2009. Two weeks later, Orthofix made a $10 million partial debt repayment, ahead of the scheduled maturity date, which increased the company's flexibility in executing its operating plan. It is the Board’s judgment that additional positive developments are on the near term horizon for Orthofix, including its Blackstone subsidiary.
On January 28th, I sent you a letter questioning the nomination of Peter Feld, a 29-year-old Ramius nominee and employee with no health care experience and a strikingly thin (and disconcerting) record of service on just two Boards: Sharper Image, an American retailing icon which filed for bankruptcy and eventual liquidation shortly after Mr. Feld’s departure, and CPI Corp, recently threatened with delisting by the New York Stock Exchange. Particularly in a difficult operating environment, it is unclear what value either Mr. Lee or Mr. Feld would bring to our business. Frankly, the Board is deeply troubled by the respective backgrounds of both Mr. Lee and Mr. Feld, as well as Ramius’s efforts to impose these two people on our team, our culture and our organization.
In addition to Mr. Lee and Mr. Feld, Ramius has also nominated Charles T. Orsatti and J. Michael Egan to our Board. While we think Mr. Lee and Mr. Feld offer no obvious benefit to our broad shareholder base, and would clearly damage our Board and the reputation of our company, we are prepared to formally meet and interview both Mr. Orsatti and Mr. Egan at the earliest available date.
Sincerely,
James F. Gero
Chairman, Board of Directors
Orthofix International NV
cc: Orthofix Board of Directors
About Orthofix
Orthofix International, N.V., a global medical device company, offers a broad line of minimally invasive surgical, and non-surgical, products for the spine, orthopedic, and sports medicine market sectors that address the lifelong bone-and-joint health needs of patients of all ages–helping them achieve a more active and mobile lifestyle. Orthofix’s products are widely distributed around the world to orthopedic surgeons and patients via Orthofix’s sales representatives and its subsidiaries, including BREG, Inc. and Blackstone Medical, Inc., and via partnerships with other leading orthopedic product companies. In addition, Orthofix is collaborating in R&D partnerships with leading medical institutions such as the Orthopedic Research and Education Foundation, Rutgers University, the Cleveland Clinic Foundation, Texas Scottish Rite Hospital for Children and National Osteoporosis Institute.
Contact:
Orthofix International, N.V.
Dan Yarbrough, 617-912-2903
Vice President of Investor Relations
danyarbrough@orthofix.com
via yahoo
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