The Santa Barbara, Calif.-based breast implant maker relied on a single silicone implant supplier, Silimed, until 2015, when regulators in the U.K. halted sales there and Brazil’s Anvisa suspended production at Silimed. Inspections had revealed that the surfaces of some devices were contaminated with particles.
The news sent shares in Sientra down -52.9% to a $9.70 close Sept. 24, 2015 (the stock closed at $6.90 per share yesterday). Zeini was soon replaced by Jeffrey Nugent, who has since engineered a turnaround, and the S.E.C. last September sued Zeini. The lawsuit alleged that Zeini, who founded Sientra in 2006, learned of the problem days before a $61 million follow-on offering and concealed it from both his subordinates and the underwriters of the offering. Sientra went public in November 2014.
In an August 15 ruling, Judge John Walter of the U.S. District Court for Central California gave Zeini 14 days to pay the $160k penalty to the S.E.C. and started the clock on the five-year ban from public companies. Zeini consented to Walter’s final judgment without admitting or denying the allegations, according to court documents.
Silimed’s CE Mark was suspended Sept. 17, 2015, but Zeini didn’t know until three days later, when Silimed’s CEO called to inform him of the suspension and that company’s plans to send a field safety notice the next day announcing it, according to the S.E.C. With the follow-on slated to close Sept. 23, Zeini allegedly embarked on a scheme to conceal the suspension until the closing, revising the field safety notice to downplay the situation and ordering his deputies not to say anything, according to the securities regulator’s lawsuit.