Medical-equipment maker Vital Signs Inc. announced that it has settled a lawsuit filed by former chief financial officer Joseph Bourgart. The New Jersey-based company, which did not disclose terms, pointed out that settlement funds will be paid by Vital Signs’ insurance carrier and will be immaterial to the company’s financial results.
Bourgart filed his lawsuit in May 2003, claiming that the company improperly booked sales and overstated earnings, according to a Financial Times report. Management at Vital Signs insisted that the claims were “erroneous” and maintained that any alleged wrongdoing would have happened during Bourgart’s tenure as CFO, when he signed off on the company’s financial results without bringing up concerns.
For his part, Bourgart claimed at the time that he warned other Vital Signs executives about potential accounting-rule violations. The former finance chief told Reuters that he doubted whether the company’s inventory was accurately reported in August 2002 and suggested that a write-down might be needed. But because his doubts couldn’t be fully proved at the time, Bourgart said he certified the company’s financial results, according to the report.
The next month, after collecting alleged evidence of loose accounting at the company, Bourgart reportedly brought the purported problem to the attention of other executives. He claimed his allegations went unheeded.
Bourgart resigned as Vital Signs’s CFO in January 2003 with no severance pay after company management discovered he had provided an investor with material corporate information. He was replaced by Frederick Schiff, a former finance chief at Bristol-Myers Squibb.
In December 2003, after an investigation led by Deloitte and Touche and the law firm of Wolff and Samson, Vital Signs announced that its audit committee had found no evidence of fraud or illegal activity after examining each of the allegations in Bourgart’s complaint.
Vital Signs added that its audit committee and its auditors, Goldstein Golub Kessler LLP, agreed with that no restatement of the company’s financials was required.
After he resigned, Bourgart was replaced by Frederick Schiff, a former finance chief at Bristol-Myers Squibb. Schiff had left the drug giant after a 20-year career and after problems with the company’s inventory were uncovered.
In May, Vital Signs announced that Schiff had resigned but provided no further explanation. In a press release at the time, Schiff stated: “I have nothing but admiration for Vital Signs. I will be pursuing other opportunities and did not resign because of any concerns with or lack of faith in the company.”
He was replaced by Richard Feigel, who currently serves as interim chief financial officer.