(Reuters) - The U.S. Securities and Exchange Commission on Wednesday sued the founder and former chief executive of Sientra Inc (SIEN.O) for fraudulently concealing problems with his company’s breast and other implants as it was raising $61.4 million in a public stock offering.
Hani Zeini, 54, was accused of letting the offering close on Sept. 23, 2015, despite having learned three days earlier from the chief executive of the company’s sole supplier that European implant sales would be suspended because contamination had been detected in an audit of manufacturing procedures.
Sientra’s share price sank 52.9 percent on Sept. 24, 2015, to $9.70 from $20.58, after it disclosed that the U.K. Medicines and Healthcare Products Regulatory Agency had suspended the certificate needed for the supplier, Brazil’s Silimed, to sell the implants.
Zeini could not immediately be reached for comment, and a lawyer for him could not immediately be identified.
The SEC said Zeini had hid “damaging” details from “every other professional” working on his Santa Barbara, California-based company’s 3 million share offering, including its chief financial officer, directors, lawyers, auditors and bankers, and tried to cover his tracks after it was done.
“Zeini acted knowingly, recklessly and without reasonable care,” the complaint said.
The SEC is seeking a civil fine and an officer and director ban for Zeini. It filed its lawsuit with the U.S. District Court in Los Angeles.
Sientra settled related charges, but was not fined after providing “extensive” cooperation, the SEC said. The company did not admit or deny wrongdoing. Silimed was not charged.
The SEC did not respond to a request for comment.
According to his LinkedIn profile, Zeini is now the owner of Elissar Advisors & Investment Co in Santa Barbara. He stepped down as Sientra’s chief executive in November 2015.
Sientra announced in January 2016 that independent testing showed that its implants were safe.
Its shares traded down 39 cents at $23.76 in Wednesday afternoon trading on the Nasdaq.
The case is SEC v Zeini, U.S. District Court, Central District of California, No. 18-08103.
Reporting by Jonathan Stempel in New York; Editing by Cynthia Osterman and David Gregorio