Medstone Had No Insurance to Settle Suit

Medstone International Inc., its chairman and former officials had no insurance to cover the $6 million they coughed up to settle a 7-year-old shareholder lawsuit, officials say.

The lawsuit, filed in 1989, alleged that the company misled investors about the prospects of an experimental device for treating gallstones. It also alleged that two Medstone executives used insider knowledge to avoid losses by selling stock just before an adverse announcement that drove the price of Medstone shares down by more than 50%.

The company recently established a $5.5-million settlement fund to provide for its portion. Individual defendants together paid $500,000, according to officials. David V. Radlinksi, Medstone’s chairman and chief executive, refuses to say how much he personally had to pay. Radlinski, a defendant, was chief financial officer of Medstone at the time the suit was filed.