Shareholder files suit over Abbey acquisition of Total Pharmaceutical.

The lawsuit-cluttered saga of Abbey Home Healthcare Group Inc.'s acquisition of Total Pharmaceutical Inc. continued earlier this month with a class action shareholder suit filed in federal court.

The lawsuit, filed Oct. 7 with the U.S. Central District Court in Santa Ana by Abbey shareholder Barbara Nowack, accuses Abbey and Total Pharmaceutical executives of misrepresenting their companies' financial state -- a breach of securities laws that eventually led to a drop in Abbey's stock price.

The violations are alleged to have occurred during and after Costa Mesa-based Abbey's acquisition of Torrance-based Total Pharmaceutical in September 1993 for $197 million in cash and stock.

According to the suit, "Abbey's business was performing much worse than was publicly known, a poor performance overcome by falsifying Abbey's publicly reported financial results, and then by concealing the falsity of TPC's results after Abbey's acquisition of TPC."

Abbey officials declined comment. William LeRach, Nowack's San Diego-based attorney, could not be reached for comment.

The suit alleges Abbey Chairman and CEO Timothy M. Aitken, driven to rapidly expand his home health care company, consummated the purchase of Total Pharmaceutical based on misleading financial information provided by its chairman and CEO, Victor M.G. Chaltiel.

Chaltiel's misdeeds and his subsequent dismissal as Abbey's CEO were covered up by Abbey management in order to support its share price, according to the suit. As information of the row was leaked, Abbey's stock price dropped.

The suit alleges Abbey's management responded to the drop by saying it was a result of problems integrating the two companies, rather than any distortion of company financials.

Abbey's stock hit a 52-week high in early February of $29.50 a share. It hit a low of $14.50 in late June. It was in the $17-$19 range, with a profits-to-earnings ratio of 33, last week in over-the-counter trading.

Aside from Nowack, who resides in Wisconsin, the suit names as plaintiffs all who purchased Abbey common shares between Sept. 7, 1993, and June 16 of this year. It is seeking an unspecified amount to compensate for damages.

To some extent, the accusations mirror charges leveled between Chaltiel and Abbey in a privately arbitrated lawsuit. Chaltiel, who left Abbey last February and now heads a Los Angeles-based firm called Total Renal Care, is demanding $7 million in compensatory damages.

He claims he was lured to stay on with Abbey with false promises of long-term employment and then wrongfully terminated.

In a counterclaim, Abbey's attorneys have accused Chaltiel of manipulating Total Pharmaceutical's financial statements, causing Abbey to overpay for the firm by tens of millions of dollars.

Defendants in Nowack's action include Abbey Healthcare Group, Aitken, Chief Financial Officer Richard Rapp and Chaltiel, along with former TPC and Abbey executives Martha L. Robinson, Gordon Russell, Andrea M. Benko, John F. Combs, Barry C. Cosgrove, Norman C. Enriquez, Francis P. Mitrano and Danna M. Weidner. Outside securities firms and mutual funds, including Prudential Ventures Partners II, Sequoia Capital Growth Fund and its subsidiaries, were also named.

Benko, Combs and Cosgrove were dismissed by Abbey last summer for alleged insider trading of their Total Pharmaceutical shares, according to sources close to the company.

Abbey has confirmed dismissals of Total Pharmaceutical executives have occurred, but would not name names.

J. Christopher Lewis, a partner in the Los Angeles-based venture capital firm of Riordan, Lewis & Hayden and the administrator of Los Angeles Mayor Richard Riordan's blind trust, is also a defendant.

Riordan, Lewis & Hayden, of which Riordan is a partner, provided start-up capital for Total Pharmaceutical in the mid-1980s, and Lewis was a company director until November 1993, when the Abbey deal was completed.

He has been accused in the private arbitration suit between Abbey and Chaltiel of improperly approving $67,000 worth of Chaltiel's expenses days before he left Abbey.