Execs ousted, lawsuits swirling — Dentsply has been here before
Potential shareholder lawsuits are swirling around Charlotte-based Dentsply Sirona Inc. since it disclosed an internal investigation into possible securities violations. One law firm is pitching for class action clients with the statement it’s investigating “whether Dentsply cooked its books.”
The investigation is linked to the Dentsply Sirona board of directors’ April 19 decision to fire former CEO Don Casey and the abrupt resignation of one-time CFO Jorge Gomez, who had left Dentsply (NASDAQ: XRAY) May 6, became CFO at Moderna Inc. (NASDAQ: MRNA) May 9 and resigned May 10 after Dentsply’s disclosure.
If a class action suit is filed over the current issues, it will join existing litigation in U.S. Court in New York that alleges fraud going back before Dentsply International Inc.’s $5.5 billion purchase of Sirona Dental Systems Inc. in 2016 that created the current company, which has about 300 employees at its Ballantyne headquarters.
Casey is not the first executive to depart from the company under suspicion of securities violations. In fact, his immediate predecessor resigned in 2017 with a brace of fellow top executives just before a major scandal broke in public.
Informed of what the Charlotte Business Journal is reporting, Dentsply’s vice president for communications, Marion Par-Weixlberger, said the company has no comment beyond what it said recently in SEC filings and on its earnings call.
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The company has been through this kind of thing before.
In September 2017 the company announced Casey’s predecessor, Jeffrey Slovin, had resigned abruptly along with the Executive Chairman Bret Wise and Chief Operating Officer Christopher Clark. That announcement came just six weeks after the company acknowledged the SEC’s Division of Enforcement had asked the company “to provide documents and information concerning the company’s accounting and disclosures, including its accounting and disclosures relating to transactions with a significant distributor of the company.”
The company said in an Aug. 9, 2017, filing it was cooperating with the investigation. In December 2020, the company disclosed it had reached a settlement. The SEC noted at the time that “without admitting or denying the findings in the order, Dentsply agreed to cease-and-desist from violations …and to pay a $1 million civil penalty.”
While the SEC case was settled, the allegations involved there found their way into the existing federal class action suit. It alleges Dentsply Sirona had benefitted for years from an illegal, anti-competitive agreement among its three main distributors, accounting for up to 90% of its U.S. sales, and had failed to disclose the arrangement to shareholders. It started at least a decade before the merger and ended only in 2017 when one of the distributors pulled out of the deal and Dentsply Sirona’s sales plummeted.
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