The former chairman of processor Utah Medical Products Inc. has resigned, arguing in a letter that mismanagement by President Kevin Cornwell has sent the company's value tumbling from $141 million to $55 million since 1993.
The March 30 resignation letter from Perry L. Lane, who was chairman of UM from 1994-96 and a board member since 1985, offers a portrait of the Midvale, Utah-based maker of disposable and reusable medical devices wracked by internal troubles and facing sales that dropped 37 percent last year.
His departure comes after another director on the five-member board, and several vice presidents critical of management at the injection molder, left in the past year, the letter said.
But company officials said Lane's complaints amount to sour grapes because he was removed as chairman and his stock options were capped in 1996, and the company's financial problems come from difficult markets, not bad management.
``Set the picture for yourself,'' said UM's chief administrative officer, Paul Richins. ``You [referring to Lane] are approving all the actions. You come back at some point and blame somebody else for it. It's disingenuous at best.''
A company statement also said the remaining board members unanimously voted confidence in the company's direction and its management April 2. Richins, an eight-year employee of UM, was named Lane's replacement to the board April 3.
But Lane, in unusual public candor, laid out a series of complaints in a three-page resignation letter included in the company's April 8 filing at the Securities and Exchange Commission.
The letter alleges that:
Employees representing 90 percent of UM's work force initiated meetings with Lane in May 1997 to complain about Cornwell's management, reflecting ``their apprehension of continued decline in company fortunes.'' UM said the 90 percent figure is not accurate.
Cornwell categorically denied the allegations, and the board, in a split vote, decided not to have an outside investigation, Lane said.
Some corporate vice presidents and a director who later resigned, Lori Sessions, recommended later in May to the board that Cornwell step down.
A board member appointed in August, Barbara Payne, is a ``good personal friend'' of Cornwell's with ``no experience in corporate management or the health-care industry.'' Cornwell recommended her in 1995, but the board at the time ``had some concerns incident to her qualifications,'' the letter said.
Payne is described in company documents as an environmental scientist. Richins said he could not comment on why Payne was nominated because he was not part of that decision.
Less than one-half of one percent of company sales from mid-1993 to 1997 came from new products developed or acquired by UM in those years, and the company used a line of credit established for acquisitions to pay operating costs in the second quarter of 1997.
Cornwell told Lane on June 13, 1996, that a majority of the board wanted Cornwell to replace Lane as chairman. This capped several months of fighting between the two men over corporate alliances, distribution agreements and Lane's attempt to rescind Cornwell's stock buy-back program.
But company officials said Lane's dissident actions started when he was replaced as chairman, and they said the company has been battling tough markets.
UM's April 8 SEC filing said Lane's resignation is the result of an unsuccessful personal campaign against Cornwell and said Lane's ``sole focus on after-the-fact fault finding, without any coherent alternative proposals, made him deteriorate into an ineffective board member.''
UM wrote that the other directors felt employee complaints that surfaced in May 1997 were unsupported, and said the majority of the board felt that direct investigation by outside directors of the company was the best course.
The UM letter also refuted Lane's allegations that the company did not properly evaluate the safety of its Cordguard umbilical product, saying that the Food and Drug Administration approved the safety and efficacy of the device. Lane supported attempts to acquire that product, UM wrote.
A March 31 SEC filing from UM said the firm's sales slid from $38.6 million in 1996 to $24.2 million in 1997, and net profit dropped by 50 percent to $4.3 million.
The reason: The company said it lost a major distribution agreement with Baxter Healthcare Corp. and started to face cheaper competitors making catheters that UM claims violate its patent.
UM said its purchase of an Oregon injection molder in August will boost its sales and its presence in the obstetric market, but officials acknowledged some problems getting sales increases from new products.
``Our new products have not contributed materially,'' Richins said. ``There are a number of reasons in each case.''
For example, none of the products in the market for treating incontinence with electrostimulation, whether UM's or others, have achieved much success, Richins said.
Lane said he held management positions for at least 14 years for Sorenson Research Co. in Salt Lake City, rising to executive vice president before the medical products maker was sold to Abbott Laboratories for about $100 million in 1981. Lane said he retired at that point, becoming a health-care consultant and sitting on seven corporate boards.
Cornwell was named president and chief executive officer of UM in 1992. UM has three facilities, in Midvale, in Ireland and in Redmond, Ore.