The Return of Dr. Kurt Amplatz

In 1999, they were still three years away from having FDA approval for AGA Medical’s Septal Occluder, but the device had been widely adopted in Europe, bringing the company’s appraised value to $25 million. Amplatz agreed to sell his one-third stake in AGA to his partners for $8.3 million, payable over 15 years. He did this, he says, “to protect the company from exorbitant insurance payments on my health.” Insurance to give the company the wherewithal to buy Amplatz’s stock if he died would have cost AGA $700,000 a year.

When FDA approval of the Septal Occluder finally came in 2002, AGA’s sales rose to $62 million. But conflict had developed among the partners. Amplatz says it was “mainly ethnic and personal differences” between Gougeon and Afremov. Press accounts of the ensuing litigation describe accusations that Afremov took kickbacks from vendors, and countercharges that Gougeon and Amplatz attempted to render Afremov’s shares in AGA worthless. At any rate, Amplatz says, “I had to make a choice, and obviously I chose my son-in-law.”

In October 2002, being two-thirds of AGA’s board of directors (Afremov being the remainder), Amplatz and Gougeon voted to promote Gougeon from executive vice president to CEO. Gougeon immediately fired Afremov. Afremov promptly sued.

Judge Karasov ordered in March 2003 that all three partners, Afremov included, must come to unanimous agreement in decisions about AGA’s operations. In May that year, she determined that Gougeon and Amplatz had violated that order, and she appointed former district court judge John Borg, an assistant general counsel for Medtronic, as a receiver for AGA Medical. In September, finding Gougeon in violation of court orders again, she banned him from AGA. Two months later, she banned Amplatz as well.

Amplatz, Gougeon, and Afremov continued to meet in management sessions chaired by Borg and held in hotel conference rooms. Multiple attorneys were present to represent the interests of each of the partners plus Borg. “I finally didn’t go anymore because I got tired of it,” Amplatz growls. “Bunch of lawyers.”

The Most Unusual Deal

Attorneys cycled in and out of the case on both sides in ensuing months. By 2004, the litigation had evolved into a question of who, Gougeon or Afremov, would be allowed to buy out the other’s share in the company. That’s when Jack Helms, of Minneapolis investment bank Goldsmith Agio Helms, entered the case.

“Both parties were told [by the judge] to go to the market, raise the financing, and submit competing bids,” Helms explains. His firm represented Gougeon. Afremov retained Minneapolis-based Piper Jaffray.

“It was the most unusual deal we’ve ever been involved with,” Helms says. The sum required for one partner to buy out the other was large enough that “there was a relatively small universe of financial equity investors big enough to handle it. So Piper was approaching many of the same investors we were.”

Helms says his pitch to investors was further handicapped by the fact that Gougeon wanted to retain a controlling 51 percent interest in AGA. “We were selling minority partnerships,” while Afremov was offering a controlling interest so that investors could “bring in their own management teams.”

On the plus side, Helms says, Gougeon’s proposal to investors laid out a compelling business plan—and it came with Amplatz attached. Some 150 letters, affidavits, and e-mails poured in from doctors and hospitals around the world, all saying essentially the same thing. As Helms puts it: “The product [the Septal Occluder] is a miracle and the man [Amplatz] is a savior.”

In the end, Gougeon and Helms found the money to buy out Afremov and the case was settled last July. Funds came from New York private equity firm Welsh Carson Anderson & Stowe. The amount remains sealed by court order, but market sources say that Afremov received approximately $300 million. Gougeon, 40, is again AGA Medical Corporation’s CEO and its majority shareholder, with Welsh Carson having what the company calls a “significant ownership position.”

Linda Holstein, a Minneapolis attorney hired by Gougeon in October 2004, near the end of the legal marathon, says, “It was one of the most exciting cases I’ve ever had, to be in litigation so fractured and that had gone on for so long, where we had to convince potential investors that this company is fabulous and worth backing.” She knows that for Gougeon and Amplatz, the experience was different: “Litigation sucks the life out of people. First it sucks their money, then their souls. They persevered through some very tough times.”