Three Endocare Directors May Face SEC Lawsuits

Federal regulators plan to file lawsuits against two former directors and one current board member of Endocare Inc., an Irvine-based maker of medical devices, the company said Friday.

Endocare said Securities and Exchange Commission investigators, who spent more than a year scrutinizing the company’s accounting practices, notified Endocare that they would recommend that the agency’s commissioners take the action. The notification was made in what is known as a Wells notice, which allows the company’s lawyers to respond to the allegations before they are formally filed.

Endocare said last month that SEC staffers intended to recommend civil actions against the company, its former management, former sales personnel and its current head of sales and marketing.

Endocare disclosed in April 2003 that the SEC and the Justice Department were examining the accounting practices underlying its financial statements for 2001 and 2002.

Its news release Friday didn’t disclose the identities of the director and former directors who have been targeted except to say they are former members of Endocare’s audit committee.

“Company management has indicated that the entire Endocare organization remains committed to cooperating fully with the SEC and bringing a timely close to these proceedings,” the company said. Its chairman and chief executive, Craig T. Davenport, didn’t return a call seeking comment.

Endocare develops cryosurgical treatments for prostate cancer and other tumors. It lost $25.4 million last year on sales of $30.5 million. Shares of the company were unchanged Friday at $3 in over-the-counter trading.