Misonix (NSDQ:MSON) agreed to enact a six-year plan to reform its corporate governance and cover $500,000 worth of legal fees to settle a shareholders derivative complaint brought over alleged violations of the Foreign Corrupt Practices Act in China.
The case dates back to the fall of 2016, when then-chairman & CEO Michael McManus Jr. stepped down just before the Farmingdale, N.Y.-based ultrasound device maker delayed its annual report due to “deficiencies” in its internal financial reporting controls and voluntarily informed the U.S. Securities & Exchange Commission and the Justice Dept. of possible FCPA violations concerning a distributor in China.
By February 2017 Misonix was disclosing potential violations of company policy and possible legal and regulatory violations involving McManus and others, revealing that its board’s audit committee found “material weaknesses” in its financial reporting controls and that “disclosure controls and procedures were not effective, and were not operating at a reasonable assurance level,” according to a regulatory filing.
In June of that year a pair of plaintiffs filed separate derivative complaints on behalf of the company. The lawsuits, which were later joined, claimed violation of the Securities Exchange Act of 1934, breach of fiduciary duty, gross mismanagement, unjust enrichment and waste of corporate assets and sought “enactment of material enhancements to the company’s internal controls and corporate governance practices, in particular with regard to, among other things, the company’s compliance with the FCPA, so that the alleged damage to the company would not recur.” The defendants denied each and every claim alleged by Plaintiffs.
After a five-month negotiation that began in August 2017, the plaintiffs and Misonix agreed in principle to a set of reforms designed to improve internal controls on FCPA compliance, due to maintained for at least six years, according to the filing. Negotiations over the plaintiff’s legal fees foundered, leading to mediation, which in turn resulted in a deal to cover $500,000 worth of legal fees.
DeviceTalks Minnesota's leadership track is designed to provide attendees with insights on topics such as:
Use code SAVE15 to save 15%!