Financial, legal worries dogged breast implant firm
PARIS (Reuters) - Signs of legal problems and financial losses surrounding the French breast implant manufacturer at the heart of a scandal affecting hundreds of thousands of women worldwide can be traced back as far back as 2003, regulatory filings show.
France's Poly Implant Prothese (PIP) shut its doors in 2010 after declaring bankruptcy but financial documents filed by its Delaware-based holding company, Heritage Worldwide Inc., suggest the firm had been in disarray for years amid legal action and rising debt woes.
An examination of filings with the U.S. Securities and Exchange Commission showed that Heritage, a shell company controlled by the founder of PIP, had been swinging in and out of losses and facing multiple lawsuits from women around the world who had experienced health problems following their implants.
Heritage acquired PIP in 2003 and held over 90 percent of its stock, but it in turn was 79 percent controlled by PIP founder Jean-Claude Mas, who has dropped out of sight since the company shut its doors in 2010.
Incorporating in Delaware allowed the holding company to benefit from the U.S. state's management-friendly laws.
A final quarterly report filed in February 2009 showed that Heritage was searching for loans to repay its debt and sustain its operations.
"There are no assurances that the company will have sufficient funds to execute its business plan, pay its obligations as they come due or generate positive operating results," Heritage said in the February 2009 filing.
Its final annual report for 2008 warned that liability claims from angry clients could force it out of business.
"Other breast implant manufacturers that suffered such claims in the past have been forced to cease operations or even to declare bankrupt," the company wrote.
By March 2010, the doors of PIP were shut.
The lawyer for PIP, which is still in liquidation, told Reuters that neither the company nor Mas would comment on the matter. Yves Haddad said silence was out of "decency and discretion."
Attempts to contact representatives from Heritage were unsuccessful. The company does not appear to still exist, with its trading symbol showing a year high of 0.049 cents in July.
Today PIP, which sold its products in some 65 countries and for a time was the third-largest maker of breast implants, is at the heart of an international health scare. The French government on Friday urged 30,000 women in France to seek removal of the defective implants made by the company.
As many as 300,000 women worldwide may have received PIP implants, which were exported to Latin American countries such as Brazil and Argentina, and Western European markets such as Britain, Germany, Spain and Italy.
France's health safety regulator has said that some of PIP's implants were filled with sub-standard silicone, a cheaper industrial grade that the agency had not approved.
In the SEC filings, Heritage disclosed that it was sued in both Nottingham and London in 2006 by plaintiffs alleging that the envelope surrounding their implants were "not resistant enough and could cause pain and inflammation when they leak."
Those courts later ordered PIP to pay $2.3 million in damages, a sum it said it could not afford.
American plaintiffs also had sued the company or its PIP subsidiary, according to the filings. Heritage disclosed in 2003 that it had received notice of claims "relating to failures or defects" from at least 600 patients in the United States, in connection with sales of breast implant products from 1996 to May 2000.
The company carried product liability insurance with a limit of $1 million worldwide, except for the U.S. and Canada.
Court records show PIP was sued for product liability numerous times in U.S. state and federal courts. Several cases were voluntarily dismissed after undisclosed settlements with the company. Some cases were withdrawn following PIP's bankruptcy.
It does not appear that any cases went to trial.
One complaint filed in federal court in Houston includes a warning letter to PIP from the Food and Drug Administration, listing pages of violations discovered during an inspection of a facility in La Seyne, Sur Mer, in France.
The warning letter cited the firm's failure to investigate the deflation of its implants and a failure to report more than 100 complaints in France and elsewhere to the FDA.
Heritage traces its history to a St. Louis company called Summit Productions Inc that formed in 1983 to produce gospel records, according to SEC filings. The company was an inactive shell that went through name and ownership changes until it became PIP's holding company in a reverse merger in 2003.
Despite its legal problems, Heritage's description of its products and business plan appeared rosy. Heritage said PIP produced many varieties of implants "to meet customers' preferences and needs" and it cited its quality control standards and certifications.
In its 2008 annual report, Heritage described its intention to expand to China, where it was expecting sale authorization for its implants. It cited plans for subsidiaries in Germany, the Netherlands and Belgium to market directly to surgeons.
Heritage's final quarterly report filed in February 2009 showed a net loss of $1.25 million for the six months ending December 31, 2008. The full-year loss was $5.1 million.
The company earned revenues of $1.2 million within France during that six-month period, and $6.2 million outside the country. Annual revenues in 2008 were $17 million.
(Additional reporting by Tom Hals in Wilmington, Delaware)
(Editing by Daniel Flynn)