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US Judge Dismisses Defamation Case By Ex-Cyberonics CEO

By Chad Bray, Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- A federal judge dismissed a defamation suit Thursday by Cyberonics Inc.'s (CYBX) former chief executive against SunTrust Banks Inc.'s ( STI) capital markets unit and two research analysts over their statements regarding the timing of the former CEO's options grants.

In an order Thursday, U.S. District Judge John G. Koeltl in Manhattan threw out the suit by Robert P. "Skip" Cummins, the medical device maker's former top executive, saying statements made in June 8, 2006 and June 12, 2006 reports by research analysts Amit Hazan and Jonathan Block and subsequent statements by Hazan in media interviews weren't defamatory.

Cummins had alleged the reports, which raised questions about his June 2004 stock option grants and compared them to improper options backdating, were defamatory. He claimed the reports and subsequent interviews included 37 defamatory statements.

"The core facts about the June 15 options were indisputably true and the authors' conclusions were protected statements of opinion based on disclosed facts," the judge said.

On June 15, 2004, the board of directors issued 150,000 stock options to Cummins and 100,000 options to other executives of Cyberonics on the same day trading in the company's stock was suspended while the U.S. Food and Drug Administration considered whether to recommend a therapy for depression developed by Cyberonics. The FDA recommended the treatment that same day.

The options were tied to the June 14, 2004, closing price and the company's stock shot up 78% when trading resumed on June 16 and the value of Cummins' options increased by about $2.3 million.

Amid an ongoing controversy over backdated stock option grants nationwide, the research analysts produced a report on June 8, 2006 examining Cummins' 2004 option grants that said the grants, which were "in-the-money," would require an immediate recording of compensation expense and said "it appears to us that even if backdating by definition did not occur, the effect was exactly the same."

The next day, the U.S. Securities and Exchange Commission launched an informal probe of the company and on June 12, 2006, the SunTrust analysts again raised questions about the options grants.

In November 2006, Cummins resigned at the request of Cyberonics board.

A lawyer for Cummins didn't immediately respond to a request for comment late Thursday.

-By Chad Bray, Dow Jones Newswires, 212-227-2017; chad.bray@dowjones.com

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  08-21-090111ET
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