Shareholders Allege Fraud in Quality Systems Lawsuit

Certain shareholders of Quality Systems Inc. filed a class action securities fraud lawsuit Friday against the seller of health-care information and its officers, directors and underwriters.

The shareholders--those who bought stock from June 26, 1995, to July 3, 1996--allege that the defendants artificially inflated Quality Systems’ stock from $4.50 a share to as high as $35.25 a share by making false representations about the effectiveness of the company’s operations.

In addition, the suit alleges, the company and its insiders sold 2.2 million shares to the public at artificially inflated prices for a total of more than $43.4 million.

Last July, the company said that weak sales were leading to declining revenue and income, which the suit alleges led to a sell-off that dropped the company’s stock 67% in six weeks to $11.75 a share.

Company executives wouldn’t comment. Robert McGraw, its chief financial officer, said the company had not yet been served with the class action. Controversial plaintiffs’ securities lawyer William Lerach of San Diego filed the lawsuit in Orange County Superior Court. (James S. Granelli)