We also posted about questions regarding the authors of an article sponsored by the company about the vagus nerve stimulator. These questions revolved around undisclosed conflicts of interest, and the extent a ghost-author was responsible for the article.
Cyberonics also came to our attention because of questions about stock-options granted to its top executives. Now, according to the Houston Chronicle,
Two top executives have exited Cyberonics, after it disclosed that its stock options problems are much broader than previously reported.It's funny how questionable financial practices seem to go hand-in-hand with dodgy marketing and strange science. In my humble opinion, cases like this suggest the urgent need for better governance of health care organizations, meaning governance that is transparent, accountable, and ethical. But given the way many helath care organizations are currently run, should it be any surprise that costs constantly go up, access constantly goes down, quality is constantly questioned, and health care professionals are increasingly miserable?
On Monday, investors bid up shares of the Houston-based medical device maker, which said Chairman and CEO Robert Cummins and Chief Financial Officer Pamela Westbrook resigned.
The duo was replaced, on an interim basis, by three people: Tony Coelho as chairman, Reese Terry Jr. as chief executive and John Riccardi as chief financial officer. George Parker was appointed as interim chief operating officer.
The personnel changes came as Cyberonics reported widespread stock option problems in a filing Friday with the U.S. Securities and Exchange Commission.
Before Friday, the company had acknowledged only one instance where stock options were at issue. Those options were given to top executives in June 2004, on the day before the stock market had a chance to react to positive news about a Cyberonics product. Some analysts have described the 2004 options activity as 'make-your-own-luck' grants. Others have called it springloading. On June 9, the SEC began an informal investigation into the two-year-old options.
On Friday, Cyberonics said a board committee that reviewed the company's stock option grants concluded that 'incorrect measurement dates were used for certain stock option grants made principally during the period from 1999 through 2003.'
Cyberonics estimates its financial statements from that period would need to be adjusted to reflect about $10 million in additional 'noncash compensation charges' because of the backdating activity.