Sierra Tucson, a Tucson, Ariz.-based psychiatric and substance-abuse treatment provider, last week reached an $11 million settlement in a class-action shareholder lawsuit.
The lawsuit, filed in U.S. District Court in Tucson in 1992, was brought by shareholders who had bought the company's stock between October 1990 and mid-July 1992. The company, Chairman William T. O'Donnell Jr. and its chief operating officer, John H. Schmitz, were accused of misrepresentations regarding the company's condition.
Sierra Tucson stock, which is traded over the counter, reached a high price of $31.25 in 1991 before sliding badly in 1992. The company has closed two of its three treatment facilities and now operates 281-bed Master Treatment Center in Tucson. Last week, the stock was selling for about $4 a share.
The settlement must be approved by the court.
Sierra Tucson and its executives will split the cost of the settlement with the company's liability insurer, said James Rianoshek, the company's investor relations director. In fiscal 1993, Sierra Tucson set aside a $6 million reserve for shareholder litigation.
Despite agreeing to the settlement, the company and its executives deny any misrepresentations or violation of securities laws.