(CN) - Executives at CooperVision, the third largest manufacturer of soft-contact lenses in the world, raised the market guidance on earnings for the company's stock even though they knew customers were suffering from torn corneas and other eye problems caused by manufacturing glitches at two recently off-shored facilities, according to a class action filed in federal court in California.
     As a result, the members of the class claim, the stock crashed from its artificially inflated high causing them to lose on their investment while the company's executives were allegedly busy cashing out.
     Robert S. Weiss the CEO of CooperVision's parent company as well at its CFO Eugene J. Midlock and Treasurer and Chief Strategic Officer Albert White collectively sold $26.5 million in company stock in the months leading up to an August 19, 2011 announcement that the company was starting a recall of specific lots of its Avaira Toric contact lenses due to customer complaints of "hazy vision," the suit says.
     The company downplayed the recall, according the suit, emphasizing that it was limited to one product line from one facility. Two weeks after the recall was announced the company raised its earnings guidance for the third time saying that the guidance "takes into account the impact of our recent voluntary limited recall."
     During a conference call with analysts Weiss said that the recall was "not a big deal" and that it was not "a material event."
     The company allegedly knew customers were experiencing more than hazy vision and that the problem was not limited to one product line or facility. "Unbeknownst to investors, by late October 2011 the Food and Drug Administration had received at least 40 reports of problems associated with various CooperVision contact lenses some involving CooperVision's Avaira Toric, but many also involving its Avaira Sphere. Dozens of users reported problems ranging from severe injuries, including torn corneas, which required emergency medical treatment." [Italics in the original.]
     On Nov. 15, CooperVision expanded its recall to include almost all of the five million Avaira Sphere lenses it had shipped and that it had reserved more than $23 million to cover the recall.
     After the announcement the price of the company' stock fell 22 percent from its high of $84 in September just after the initial recall was announced.
     According to the suit, CooperVision began moving its manufacturing facilities from Norfolk, Virginia to Puerto Rico and the United Kingdom in late 2009 to reduce its operating costs and ramp up its production of the Avaira Toric line which is marketed to contact lens wearers who suffer from astigmatism.
     Plaintiffs are represented by Mary Blasy with Scott+Scott, LLP and Amber Eck with Zeldes & Haeggquist, LLP both of San Diego.