Paradigm Medical Industries Inc. is facing class-action lawsuits alleging the company misled investors and released information that artificially inflated the price of its stock.

In the second suit filed in the last month against the Salt Lake-based medical opthalmologic equipment maker, Paradigm shareholder Michael Marrone said the company on several occasions falsely claimed it had received reimbursement authorization codes from the American Medical Association for one of its devices, the Ocular Blood Flow Analyzer (BFA).

Without the AMA authorization, "health-care providers could not be reimbursed by insurers or third party payors (sic) for performing procedures with Paradigm's BFA," the lawsuit states. "This would necessarily limit sales of the BFA severely."

Marrone alleged the AMA's editorial panel rejected the company's request months before the company began saying it had received authorization.

The lawsuit, filed Monday, names the company; its founder and former chief executive, Thomas F. Motter; former chief operating officer Mark Miehle; and senior vice president John Hemmer.

In addition to the alleged authorization misstatements, the lawsuit also asserts that Paradigm made false and misleading statements about a purchase agreement with a company that had operations in Mexico. Citing a Paradigm press release, the lawsuit said the company estimated the value of the deal at $70 million. The lawsuit contends there was no deal.

As a result of the alleged misrepresentations and misstatements, the lawsuit says Paradigm's stock was artificially inflated. During the period in question, April 2001 through May 2003, the value of the company's stock peaked at $3.40 per share. On Wednesday, the company's stock closed up 4 cents at 36 cents per share.

According to Marrone's attorney, Thomas Karrenberg, Marrone owns 11,000 shares of Paradigm stock.

The first class action suit was filed May 14, also alleging misrepresentations that affected the company's stock price. Karrenberg said it is likely that the two lawsuits, along with any that may be filed in the near future, will be consolidated into one case.

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Gifford Price, an attorney representing Paradigm, said the allegations are "erroneous" and that the company will be vindicated.

"Paradigm intends to vigorously defend the action," Price said. "Much in the complaint makes reference to the allegations that Paradigm never received authorization to use a reimbursement CPT code from the AMA for its blood flow analyzer, a product used to collect information about blood flow to the eye to identify patients at risk for glaucoma. These allegations are clearly erroneous, and Paradigm strenuously denies the accuracy of such statements.

"The complaint simply does not have the facts correct. The CPT code has been properly used and reimbursements have been received by physicians and practitioners pursuant to the code. Thus it is believed that the company's position will be vindicated. Issues surrounding the dissemination of inaccurate information pertaining to the CPT code matter and its effect on the company will be carefully reviewed. The company, of course, will appropriately respond to the processes being used and any other issues raised in the litigation."


E-mail: jnii@desnews.com

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