MedQuist Inc., the Mount Laurel transcriber of medical records that is under investigation by the Securities and Exchange Commission, has announced the resignations of two top executives and cash-settlement offers to some disgruntled customers and shareholders.
The company said last week that its president, Frank Lavelle, and chief operating officer, Linda Reino, have resigned. Howard S. Hoffmann, the chief executive officer for nearly three years, will assume the duties of president.
MedQuist's chief technology officer, Mark Ivie, and senior vice president of operations, Michael Clark, will together assume the responsibilities of chief operating officer.
The company said it will not fill the positions. Hoffmann was traveling and unavailable for comment.
The departure of senior executives was the latest development for MedQuist, which has been plagued by allegations of overbilling customers and underpaying employees.
In 2004, MedQuist announced a probe into the company's billing practices after an employee complained of potentially improper practices. The Securities and Exchange Commission began an investigation, and MedQuist was subpoenaed by the U.S. Attorney's Office in Massachusetts in late 2004.
Several top employees, including the CEO, left in July 2004. That same year, the company said its 2002 and 2003 financial results were unreliable. MedQuist has not filed financial results with the SEC since 2004.
The company said its old billing system caused some clients to be charged more and some to be charged less. The billing method for some accounts was changed without telling customers "in order to affect profit margins," according to an earlier SEC filing.
Several class-action lawsuits have been filed by shareholders, customers and employees.
MedQuist said in a recent SEC filing that it reached a "memorandum of understanding" March 23 with the lead plaintiff in a shareholder lawsuit. The company agreed to pay $7.75 million to settle all claims. The settlement is subject to approval by the U.S. District Court in New Jersey.
In an effort to resolve billing concerns and litigation with customers, MedQuist's board has authorized management to make accommodation offers. As of March 31, the company entered into agreements with customers and paid, or credited to their account, "an aggregate amount of $52.6 million," according to the SEC filing.
Additional accommodation offers have been made to other customers.
MedQuist's board further authorized the company to issue credits to some customers that can be used against future purchases.
MedQuist, which provides electronic medical transcription services for hospitals, medical professionals and insurers, said its existing cash resources and cash flow from operations were "sufficient" to fund all of the customer accommodation offers.
As of March 31, the company had $173.4 million in cash and cash equivalents and no debt.
The stock has fallen from $51 a share in 2000 when Royal Philips Electronics NV, the Dutch conglomerate, spent $1.4 billion to acquire a 70 percent stake in MedQuist. The stock was delisted from the Nasdaq in June 2004 and now trades on the pink-sheet electronic quotation system. Shares were down 52 cents, or 5.78 percent, to $8.48 Friday.