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Baxter International Inc. Class Action Lawsuit

Case Summary

Company Name
Baxter International Inc.
Stock Symbol
BAX
Class Period
February 21, 2019 to October 23, 2019
Court
Northern District of Illinois

On November 25, 2019, the Baxter International Inc. class action lawsuit was filed charging Baxter and certain of its officers with violations of the Securities Exchange Act of 1934.  The Baxter class action lawsuit was commenced in the Northern District of Illinois on behalf of purchasers of Baxter common stock between February 21, 2019 and October 23, 2019 (the “Class Period”) and is captioned Silverman v. Baxter International Inc., et al., No. 19-cv-07786.

Baxter provides a broad portfolio of essential healthcare products, including acute and chronic dialysis therapies, sterile intravenous solutions, infusion systems and devices, parenteral nutrition therapies, inhaled anesthetics, generic injectable pharmaceuticals, and surgical hemostat and sealant products.

The Baxter class action lawsuit alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Baxter’s business, operations, and financial condition.  Specifically, defendants failed to disclose that certain intra-company transactions, undertaken for the purpose of generating foreign exchange gains and losses, used foreign exchange rate conventions that were not in accordance with generally accepted accounting principles (“GAAP”) and enabled intra-company transactions to be undertaken after the related exchange rates were already known; and that Baxter lacked effective internal control over financial reporting and, as a consequence, Baxter’s financial statements were misstated and would likely require correction or amendment, which would force Baxter to delay the filing of its quarterly report on Form 10-Q with the U.S. Securities and Exchange Commission (“SEC”) for the period ending September 30, 2019.  As a result of this information being withheld from the market, the price of Baxter common stock was artificially inflated to nearly $90 per share during the Class Period.

Then on October 24, 2019, Baxter revealed that it had recently begun “an investigation into certain intra-Company transactions undertaken for the purpose of generating foreign exchange gains or losses.”  According to Baxter, “[t]hese transactions used a foreign exchange rate convention historically applied by Baxter that was not in accordance with [GAAP] and enabled intra-Company transactions to be undertaken after the related exchange rates were already known.”  Baxter admitted that “[t]hese intra-Company transactions resulted in certain misstatements in Baxter’s previously reported non-operating income related to net foreign exchange gains” and acknowledged that, “[u]pon completion of the investigation and Baxter’s evaluation of the materiality of the misstatements, Baxter expects to either amend its periodic reports previously filed with the SEC to include restated financial statements that correct those misstatements, or include in reports for future periods restated comparative financial statements that correct those misstatements.”  In addition, Baxter stated that “[t]he Audit Committee of Baxter’s Board of Directors is overseeing this investigation with the assistance of independent, experienced external advisors,” that “Baxter voluntarily advised the staff of the [SEC] that the internal investigation is underway and intends to provide additional information to the SEC as the investigation progresses,” and that “[t]he Company does not expect to file its quarterly report on Form 10-Q for the period ended September 30, 2019 on a timely basis.”

Following this news, the price of Baxter common stock declined $8.87 per share, or more than 10%, from a close of $87.95 per share on October 23, 2019, to a close of $79.08 per share on October 24, 2019.

Robbins Geller Rudman & Dowd LLP is one of the world’s leading law firms representing investors in securities class action litigation.  With 200 lawyers in 9 offices, Robbins Geller has obtained many of the largest securities class action recoveries in history.  For seven consecutive years, ISS Securities Class Action Services has ranked the Firm in its annual SCAS Top 50 Report as one of the top law firms in the world in both amount recovered for shareholders and total number of class action settlements.  Robbins Geller attorneys have helped shape the securities laws and have recovered tens of billions of dollars on behalf of aggrieved victims.  Beyond securing financial recoveries for defrauded investors, Robbins Geller also specializes in implementing corporate governance reforms, helping to improve the financial markets for investors worldwide.  Robbins Geller attorneys are consistently recognized by courts, professional organizations and the media as leading lawyers in the industry.

Class Period: February 21, 2019 - October 23, 2019
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