Eye of the Storm — The Lasik-Vision story

By Trevor Cole
Originally published in Report on Business Magazine, 2001



There’s something about Dr. Hugo Sutton that reminds you of no one but Peter O’Toole. The elongated frame, the delicately expressive hands, the precise English accent – these are the obvious connections. But more, it’s the peculiar mix of apparent fragility and a reckless, flirtatious wit that seems to beckon danger. I am woundable, it says, so try. As you sit and begin to delve into the strange saga of Lasik Vision Canada, the first words from Sutton’s mouth, as it spreads into a wide, sly grin, are, "Well, it’s all about me."

Some 40 kilometers west of here, on the thickly treed enclave of Bowen Island, you’ll find somebody who disagrees. Behind a large wrought-iron gate, on a sloping property that looks toward Vancouver through boughs of Hemlock and Douglas Fir, Lasik’s former CEO, Michael Henderson, lives with his wife, Jennifer. On a misty afternoon you might find Jennifer at the stables of her riding club, sitting straight-backed on a horse stepping slowly around the dressage ring, while landscapers continue their improvements to the Henderson compound. Michael, wherever you found him, would be furiously busy -- working, directing, planning, proving in many ways, and without a trace of humour, that it’s all about him.

And they would both be right, the doctor and the executive. Fundamentally, the story of Lasik Vision’s two founders is a about the clash of business and medicine, and the battle to the corporate death that ensued.

With 15 laser centres in Canada, Lasik Vision has more clinics of its kind in this country than any other refractive surgery company, and in North America its 31 clinics in total are second only to the 62 clinics of TLC Laser Eye Centers, a Mississauga-based corporation that has focused on U.S. expansion. It took Lasik Vision less than three years to expand from a single location to those 31 clinics, on the promise of delivering high quality refractive surgery for the lowest possible cost. Now Lasik’s call centre in Burnaby B.C. fields inquiries from 3,000 potential customers a day, the waiting room in a typical clinic has some 20 couches, which on Thursdays and Fridays are filled, and every quarter Lasik’s doctors operate on more than 30,000 eyes, generating revenues of nearly $25 million.

But over the last two years Lasik Vision has also endured more bad publicity – including malpractice suits and lurid television exposés – than just about any public company you could name. This past May, it suffered the humiliation of having to restate its financial results. A proxy battle saw its board replaced, and its CEO – Michael Henderson – fired. And last August, Lasik Vision and three of its medical principals – Drs Sutton, Dan Reinstein and Avi Wallerstein – took yet another blow: Michael Henderson’s lawsuit claiming wrongful dismissal, corporate foul play and medical malpractice for the surgery performed on his own eyes by the man who had hired him, and deposed him: Hugo Sutton.

How it came to all that might be a narrative worthy of screenwriters. "It’s a movie!" says Dr. Dan Reinstein with typical exclamation. "It’s a Hollywood movie!" Reinstein’s a 38-year-old American who flexes a muscular ego whenever he speaks – if he’s involved, why it’s got to be big. Still, one of the more contained personalities involved in the Henderson suit – Avi Wallerstein – is already at work on a book.

But the effects are clear in the face of James Watson, the 35-year-old executive vice-president of sales and marketing, who isn’t getting much sleep these days for all the crises he has to manage. "These challenges are just endless," he says, rubbing his red eyes with his thumbs. Lasik Vision has almost no money in the bank, and he knows that every time the company hits the news, it further damages its chances of getting back on solid ground. "That’s all it’s ever been for us – it’s just this, ‘well how many lawsuits? What’s happened lately? I hear you guys are going bankrupt.’ It’s never been, ‘Wow, you guys have got a spectacular product.’" Watson stands in a corridor of Lasik’s Vancouver clinic, with blue-smocked technicians bustling past. "We single handedly changed the face of the industry of laser vision correction," he says. "This procedure would still cost 5,000 bucks in every corner of the continent were it not for this little
company out of Vancouver who went bullshit you don’t have to do that. You can do it differently and you can still do great surgery. But does anyone ever talk about that? No."

And now here is someone else, a journalist, digging back into the company’s sordid mess. Sutton, in a crisp white shirt and tie, smiles wryly. "We endure it," he says, tilting his shining head just so, "because at the end of the day we are professionals, and we are on a high road, and this is our duty."

Born in Devon in 1947, raised by a former World War II airforce commander, Hugo Sutton earned his medical degree at London University. In 1969, while still a student, he visited Africa and, according to the story he tells, he became profoundly aware of the importance of sight to survival. When he graduated from medical school, he flew to a small hospital in Grand Cache, a town in Northern Alberta, "to take a job that no sane Canadian wanted," and by 1973 had migrated to Vancouver to train in ophthalmology.

At about that time, and until only a few years ago, among the most common and most lucrative eye surgeries was cataract removal, which was eventually combined with a lens implant procedure. In 1978, Sutton’s career had progressed to the point where he had opened his own private cataract surgery practice, and specialized – like a lot of ophthalmologists – in the cataract treatment business.

Then two coincidental developments occurred to change that – for Sutton and many other doctors. First was the gradual evolution of refractive surgery – the process of correcting myopia or hyperopia by altering the contours of the cornea. The procedure had come a long way from the days of Dr. Carmen Barraquer, a Spanish surgeon who for 30 years had employed a technique of cutting off the top half of the cornea, freezing it, spinning it on a lathe, and then suturing it back in place. Now, with the use of new techniques and technologies – including the excimer laser – it was a viable option for those patients able to pay some $5,000 for the convenience of living without glasses or contact lenses. The second, and complementary, development was a significant drop in the fees that ophthalmologists were allowed to charge for the bread-winning cataract/lens procedure – now down, in Ontario for instance, to just $474 per eye. Thus began the stream of ophthalmologists jumping to refractive surgery as a last hope so that they could, in the words of Dr. Dan Reinstein, "continue the payments on their boats."

By 1991, his eye on the future of his industry, Sutton – a boating enthusiast as it happens – had opened up his own refractive surgery clinic with two other partners on Vancouver’s West Broadway Avenue. In that first year, they performed the initial version of the operation – known as PRK for "Photo-Refractive Keratectomy," which employs a laser to reshape the surface of the cornea – on 27 eyes. It was early days still, and they considered this number a success.

Over the next few years, Vancouver, a city imbued with the spirit of experimentation, became a burgeoning centre for refractive surgery. Techniques evolved, technology improved, and by 1996, PRK was being overtaken by Lasik, for "Laser in situ Keratomileusis," a surgical technique involving a tiny blade attached to a small whirring motor that sliced off a thin flap of cornea, exposing the lower layers to the laser’s beam. With Lasik, patients were able to skip the months of painful healing that came with PRK. The cornea was cut, the laser did its work, the flap was smoothed back, and patients – the vast majority with successful results -- could see.

There were several clinics in Vancouver trying to meet the growing consumer demand. But when one particular consumer, Jennifer Henderson, decided it was time to have her corneas sliced open, she already knew of a surgeon through mutual friends.

And that’s how she came to the tall, sweet-spoken Dr. Sutton to do the job. Just before Christmas in 1996, Jennifer Henderson began experiencing some post-operative irritation, and she came back to Sutton’s clinic. This time she was accompanied by her husband, Michael, a handsome and energetic young Irish emigrant in his mid-30s, who was an executive in the Canadian arm of the security, extermination and business services company Rentokil.

We can’t know with any certainty what went through Michael Henderson’s mind when he met Sutton and saw first hand his clinic on West Broadway, because – despite persistent requests – neither Henderson, his wife, his past colleagues at Rentokil, nor his very close ally, Sandra Matthews, agreed to be interviewed for this story. We have only Henderson’s statement of claim, registered this past summer, from which to glean his version of later events. So we can’t know, for instance, why Henderson came to Sutton’s clinic that day, or how he read Sutton’s softly playful manner. It’s clear, however, that he saw an opportunity.

"At some stage," says Sutton, propped on the black couch in his office, the long fingers of one hand resting delicately behind his ear, "the conversation came up that he was very dynamic as a person, that he felt this was a very powerful technology and that he could take it much further than it had currently been taken with the model that we had at the time, which I guess he thought was rather pedestrian or slow or old-fashioned."

As it happened, Sutton was in a mood to hear this sort of optimism. Though his Broadway Eye Clinic had been lasering about 100 eyes a month, that number now seemed to be dropping, and several of the rival clinics in Vancouver were doing better.

Though Sutton had formed a company, TMX Laser Vision Canada, he considered himself a doctor first, and he was growing fatigued with the combined job of operating on all these eyes with little help while at the same time attending to the various matters of running the company, managing the centre and paying the bills on $600,000 lasers.

Suddenly, someone apparently capable of making his business a success arrived to offer his services. Henderson, with his wavy red hair and his GQ looks and a remarkable facility with language, spoken in the clipped tones of a lad from County Down, didn’t have to work very hard to make the idea sound appealing. "Michael has great personal charm and charisma," says Sutton. "He could charm the birds from the trees. He is the most verbally adept person, in the first few minutes of acquaintance, of anybody that I’ve met. And anybody that you’ve met." Hiring him, says Sutton, "was a no-brainer."

It was around June of 1997 that Henderson joined Sutton’s company as vice-president. He was, by all appearances, exactly the right man at the time to push the company forward, to make it bigger than anyone had imagined. Sutton remembers him as being "excessively diligent, some would say workaholic." James Watson admits, "He was probably the most driven person I’ve ever met in my life."

Henderson applied that drive immediately to the task of establishing the business as a publicly traded entity. The series of intricate moves began in November of 97, when he incorporated the operation as 4155 Investments Ltd., and a month later renamed it HS Laser Vision Canada Inc., a company with 4 million shares held privately, mostly by Sutton and Henderson. In March, 1998, Laser Vision Canada became known as Lasik Vision Canada. The following month, Henderson acquired a separate numbered company, a shell, which by June, with the help of Douglas Mason, sometimes described as a "controversial Vancouver stock promoter," emerged as FVC First Venture Capital Corp. In August, FVC began trading as a venture capital pool on the Vancouver Stock Exchange. Henderson then completed the paperwork ballet in April, 1999, with a reverse takeover – FVC "bought" Lasik by exchanging its 30 million penny shares for Lasik’s 4 million shares. And a week later, when FVC changed its name to Lasik Vision Corporation, the task of getting Lasik on the VSE was done.

But in this matter, as in nearly everything else associated with Lasik Vision, there were early seeds of conflict. In his statement of claim, Henderson now alleges that Sutton misrepresented his net worth and ability to provide credit assistance to their new venture, forcing Henderson to use his own credit to build the business. Sutton denies this, and James Watson insists that in the early days of Lasik, every executive had his personal credit card out to pay for whatever was needed. Watson put up his own house, he says, to cover the advertising bills, and he still drives a 1986 Honda Accord with a burned-out tail light.

Sutton, meanwhile, has filed a separate and distinct lawsuit against Henderson, claiming three things: that Sutton loaned Henderson $100,000 to permit him to "purchase Lasik shares and to settle personal debts," of which Henderson has paid back only $40,000; that in November, 1998, he transferred to Henderson 272,000 Lasik shares at the agreed price of $2 each to bring the amount of Henderson’s holdings closer to that of Sutton’s (24% to Sutton’s 26%, according to Henderson’s own account), shares that were then flipped for 2.04 million FVC/Lasik Corp shares, but for which Henderson hasn’t paid a penny of the $544,000 owed; and finally, that, as part of an effort to bring in a group of third-party investors, Henderson agreed to put up 551,205 of his shares to be sold for discounted rates, but never did.

Throughout this, of course, there was a company to run, and here Sutton, whose suit says he relied upon Henderson’s advice and instruction in corporate and financial matters, seems to have allowed Henderson to have his way. Very soon after his arrival at the clinic, Henderson began cleaning out the employees he considered deficient. It was a move that Sutton, at first, considered beneficial, admitting that he’d been too tolerant of delinquent staff. But gradually it became apparent that, as Henderson worked doggedly toward Lasik’s expansion, he intended to keep the staff numbers low. This might well have had some justifiable business rationale, but keeping the staff small forced the medical personnel to work harder, longer hours, which meant that for them, Henderson’s initial effect was not an ameliorating one. They began to feel his influence in other ways too.

Dan Reinstein, a Cambridge-educated director of research in refractive surgery at Cornell University, had joined Sutton’s centre in order to get front-line clinical experience, which he needed in order to refine an ultrasound scanner he hoped to use to measure the layers of each cornea. Problems occur in refractive surgery, Reinstein harrumphs, because the surgeons are working without any knowledge of the specific thickness of the corneas they’re slicing into: "Nobody, actually, believe it or not, knows what they’re doing," he declares with a sweep of his hand. "I mean anatomically."

Sutton had met Reinstein at a conference a few years earlier, and perhaps he was taken with the younger man’s peacock air. So in October of ’97, Sutton arranged for him to work in the clinic through a fellowship with UBC. Reinstein set up his scanner in one of the clinic’s examination "lanes" (so called because before optometrists used mirrors, such rooms were narrow and more than 20 feet long). But Henderson resisted. "He was like, ‘We are not letting the patients under that scanner,’" recalls Reinstein. "And [Sutton] was like, ‘We are. Get back to your room.’" The younger doctor, sitting in his surgical greens at the Lasik boardroom table, turns to Sutton, "At the time, you actually had that say over him."

It was important, says Sutton, that his doctors be respected, and protected: "Psychically, emotionally, the surgeon has to be supported," especially in the context of a large medical business, which "has to go like a ballet." But it was clear early on that Henderson had little time for the delicate sensibilities of the medical staff.

Soon after joining Sutton’s operation, Henderson pressed the notion -- it may have been his idea, or it may have been a combined effort – that the way to fortune was
to jettison the traditional model for refractive surgery clinics. That method was to acquire patients through referrals from optometrists, who then provided the post-operative care and received a portion of the surgeon’s $4,000 to $5,000 fee. Instead, their company would eliminate the optometrists’s role, save costs by cutting out their portion of the fee and by standardizing every step in the "care delivery system," and attract larger volumes of patients directly with aggressive advertising and a price point well below its competitors’ – initially, $2995. And, as a public gesture of goodwill, they would offer an even lower price for nurses, whom Sutton says he considered particularly worthy.

In February of 1998, Sutton and Henderson launched this new vision. The backlash, from two camps, was instant. Sutton says he had always encouraged and championed the cause of local optometrists, who continually had to fight for respect within the medical community: "I was their friend." Now, having cut them out of the money loop, he was the enemy. "To some extent we made them redundant," he admits, "which was perhaps not an elegant professional thing at that point." And he became something of an embarrassment to his own medical community. He sensed that his colleagues at the University of British Columbia, where he was an associate professor, were mortified by his decent into what they considered discount medicine. TLC and other competitors had, to some degree, managed to rise above the admonitions against the intersection of commerce and care, largely because they ran relatively higher-priced, lower-volume operations. Now Lasik, with its claim of charging the "true" cost for the procedure, had upended that cart. Incensed competitors began to suggest that the quality of Lasik’s care was suspect.

"People think they can equate the cost with the quality," fumes Reinstein, "and maybe it’s true for leather, and maybe it’s true for cars. But Medicine is Medicine." On top of it all, Sutton lost the referrals from optometrists, and so before the new marketing campaign had taken effect, his volume dropped to just 60 eyes a month. "It was," he says, "a very unhappy time."

It was to get even less happy. When Reinstein first arrived, he was intrigued to find in Sutton’s care a number of patients with what he considered odd and interesting surgical results. "My first day," he says, "I couldn’t believe some of the things I was looking at." To Reinstein, as a researcher, the odder the result, the better, and at Sutton’s clinic, he got what he wanted. "Hugo’s nature is pioneering," he says. "And so by definition, he’s more likely to have less conservative, uh, outcomes. Certainly I know of many instances where I have improved my technique from observing what I had seen in mistakes that he had made – unknowingly – because he was first there."

But in a highly competitive environment, having patients emerging from surgery with odd results was not ideal. Word started to spread within the medical community that a certain small percentage of Sutton’s patients had complaints. And some of these patients started to seek redress – through official sanctions, through the courts and through the media.

One case hurt Sutton, and Lasik Vision, more than any other. In the spring of 1998, Deborah Ralph – one of the nurses attracted to Lasik by its special price – complained of poor vision after Sutton’s surgery. Looking for a second opinion, she went to Lasik’s main competitor, TLC. On July 6, CBC television news in Vancouver broadcast a lengthy expose on the number of complaints and suits being launched against Sutton, and Ralph’s was the featured case. She later appeared again in a similar report on CTV’s WFive.

Well before then, Lasik had determined that Ralph and the other patients going public with their complaints were being solicited and encouraged by TLC as part of what Reinstein calls "a dirty tricks campaign." In May, Lasik launched a $38 million defamation suit against TLC, and Sutton invited the BC College of Physicians and Surgeons to review his procedures. A week after the CBC telecast, Lasik filed a defamation suit against the broadcaster. That case has yet to go to trial, but in December of 1999, when several TLC associates tried to be excused from the proceedings, Justice M.D. Macaulay stated for the record that TLC had "attempted to identify, list and then contact patients of Dr. Sutton who had had complications with surgery to determine if they wished to discuss their cases with the media." In September of this year, just before its date to appear in BC Supreme court, TLC paid Lasik an out-of-court settlement fee which TLC, to Lasik’s chagrin, immediately characterized as having only "nuisance value."

Sutton’s hellish summer of 1998 – which he recalls as "personally and professionally catastrophic" – concluded, in August, with a statement from the BC College of Physicians and Surgeons that said in part: "Following discussion of the identified concerns with Dr. Sutton, he has agreed to modification of his practice, and he has voluntarily agreed not to perform these surgical procedures on patients in the higher risk categories." It was a rare public response from the college, made necessary, says Dr. Morris Van Endle, who was involved in the review, by the very public nature of the complaints. "It was a new procedure," says Van Endle now, "and [Sutton] was quite aggressive in his approach." By the time the college reviewed Sutton’s work, according to Van Endle, he had already instituted changes in his screening process, to weed out the high-risk candidates, and (though Henderson’s wrongful dismissal suit claims that Sutton failed to adhere to the college’s guidelines) he was found to be providing "good care."

Inside Lasik Vision, the effect of all of this was to help skew the balance of power. With lawsuits whirling and Sutton apparently ducking for cover, Henderson took over. It was he, for instance, who defended the company in front of the CBC camera, not Sutton, the CEO. Throughout Henderson’s interview, though a tape shows him looking barely able to restrain his hostility to the process, it was clear he considered himself in charge. By November of 1998, Henderson had risen to the position of president, and by April of 1999, in concert with his moves to take Lasik public, he was pressing Sutton, his reputation befouled, to relinquish the CEO’s title to him. "It was basically Michael deciding what to do, with two or three other people," says Dr. Avi Wallerstein, a Lasik surgeon named in Henderson’s suit. "Hugo was extremely busy doing surgery." Wallerstein goes so far as to suggest that Henderson worked to keep Sutton busy. "Michael actually liked to immerse Hugo in surgery because it would put him out of the picture…. It actually allowed Michael to take over." Henderson’s lawsuit supports this notion, and adds some intrigue, by suggesting that it was in the spring of 1999 that Sutton first tried to oust Henderson, in a failed effort to keep him from managing Lasik and to "thwart his efforts of reducing Sutton’s influence."

What’s certain is that in April, Sutton’s CEO title was Henderson’s. Sutton insists now in his statement of defense that he gave it to Henderson with the understanding that he would return it. But if that was Sutton’s expectation, it was naïve. Henderson, as CEO, proceeded to push Lasik through a massive expansion. As much as 50% of the population was eligible to benefit from refractive surgery, and to grab its share of volume, Lasik needed more clinics. Mississauga, in September of ’98, had been the second. Calgary, two months later, was the third. From the end of 1998 to September of 1999, the company grew from three clinics to 11 – giving it the most of any refractive surgery company in Canada.

At the same time, Henderson quickly established a taste for the finery of success: a white Mercedes sports car for himself, a white Mercedes SUV for Jennifer, the home and property on Bowen Island, purchased about two years ago and in constant renovations since. He had, says Watson, a "basketball-court-sized office" in Lasik’s headquarters, and a large condominium residence in a tall glass building looming within view of Lasik’s West Georgia Street location.

Perhaps this was the businessman lording it over the doctors, or perhaps that’s how they took it. In Reinstein’s stormy recollection, there was a point at which Henderson ceased to consider the input of the Lasik doctors. He discounted their training and experience. He lost, says Teinstein, "humility." And it was galling. "It is highly unpleasant," says the doctor now, "when a businessman is constantly questioning what your judgement is." It was the sort of thing that made Sutton think of Henderson as a fly, buzzing around, contaminating the medical process.

Henderson provoked resentments in other ways too. In his efforts to fully exploit Lasik’s potential customer base, he shoved hard. Price point was the key, he insisted. In TV ads, Henderson personally extolled the Lasik message – Why pay more? – standing next to a loud graphic touting "$1475 per eye." By early 1999, the advertised price had fallen to $1,598 for both. But he wanted it even lower.

"Michael believed that $999 was the price that would make people pick up the phone," says Watson. One ad that Henderson pushed through shouted the $999 rate with an asterisk, and the fine print in the bottom right hand corner of the page listed another $599 in fees. Watson worried that just as many people would be turned off by the image of "chintzy, cheap, cut-rate surgery," and sure enough, customers complained about the misinformation, prompting the Advertising Standards Council of Canada to demand a change. Watson took the opportunity to run a test ad in Air Canada’s Enroute magazine, without Henderson’s approval, listing a price of $799 per eye. He forgot that Henderson often flew on Air Canada.

Soon he a call. It was Henderson, 30,000 feet up and apoplectic, screaming expletives from his business class seat. That Monday morning, Watson came into his office to find the ad ripped out of the magazine with a note. "Never again. M.R.H." In his zeal, Henderson became, according to the Lasik statement of defense, "abusive," "offensive" and "profane." More than that, he began to employ a "frequent and irrational use of power." Executives who displeased him, such as CFO Robert Orr, were fired "without cause," according to the statement, and he used threats of dismissal "to intimidate and manipulate staff."

"People were afraid to speak their minds," says Watson. "People weren’t allowed to move a picture in an office." At the same time, Lasik employees could hardly fail to notice how Henderson seemed to favour certain staff, engaging in what the Lasik statement calls "inappropriate relations with subordinate employees." One subordinate, Sandra Matthews, an attractive, smiling young woman with long hair and impeccable lipstick, arrived in April, 1998, from her entry-level job as a patient counsellor for TLC. Soon she was rising like a flame through the executive ranks at Lasik Vision. By June of 1999, she was executive vice president of corporate development.

If the pressure on Lasik staff seemed high, it was only going to get higher. At the beginning of December, 1999, with the lawsuits against Sutton an unresolved distraction (most have yet to come to trial), Henderson called a meeting at which he announced to the executive group, including Lasik’s lead doctors, that Lasik Vision would dramatically step up the pace of expansion. With a three-year head start, it’s main competitor, TLC, had already established dozens of clinics throughout the United States. Beginning in March, 2000, said Henderson, Lasik would start catching up by opening more than 20 U.S. clinics at the astonishing pace of one clinic every week. "We just looked at him as if he was completely nuts," says Reinstein. It can’t be done, the medical staff told him. Well, said Henderson, we’re doing it.

How this chafed, this businessman’s arrogance. And yet Reinstein, who believes passionately in the standardization of care, admits now that he saw the potential symmetries between a business formula – same paint on the walls, same couches in the waiting room – and a standardized approach to the way patients were counseled, and corneas were lasered. It was the only way large volumes of patients could be treated without compromising their care. Whether driven by fear that they would be left behind, or belief in Henderson’s plan, the medical side met the challenge, devising a hiring and training system that Sutton, Reinstein and the other doctors felt would ensure a reliable level of quality. At a later meeting to discuss those plans, Reinstein realized that Henderson had pulled it off. That if he hadn’t forced the group into action, they would never have devised these new efficiencies. An internal Lasik newsletter from the period, no doubt approved by Henderson, ripples with nervous excitement. "Michael Henderson addressed the Call Centre staff at our first ever General Meeting," wrote the director of call centre operations. "We found Michael’s presentation highly motivating and everyone is in the sales spirit as a result." By gosh, Reinstein thought, he had to hand it to Henderson.

"But right at that point," says Reinstein, "that’s when I felt that he got this feeling of, like, total omnipotence." Lasik clinics became more and more lavishly appointed, going far beyond budget. Henderson "engaged in fiscally irresponsible and imprudent behaviour," says the Lasik statement of defense, including "excessive expenditures relating to construction of new clinics" and "imprudent decisions regarding the terms of lease agreements for new clinics." The internal newsletter features a marketing update from James Watson, on the launch of three California clinics, tinged with anxiety: "We have booked full-page ads in the L.A. Times, at the cost of about half the average mortgage in Canada," he wrote. "…Leaping out of bed in a cold sweat in the middle of the night thinking something has been missed, call the office, has become routine."

Henderson operated ever more unilaterally. "Michael had a way of really excluding most people out of what was going on," says Wallerstein, who Henderson appointed National Medical Director (Sutton became medical director only of the Vancouver and Burnaby clinics). "It was almost like pulling teeth to actually gain information."

Yet when people like Wallerstein or Reinstein took issue with his actions, Henderson often managed to co-op them. "Do you know why I got appointed as the national medical director?" says Wallerstein. "It’s because I was starting to raise a lot of questions…. ‘What’s going on here? We’re opening clinics and spending this kind of money? This is insane.’" When Henderson heard that Wallerstein had started to raise the issue with members of the board, he got on a flight to Montreal the next day. And then he sat Wallerstein down in his office.

"He said to me well, you know what? I want to make you the National Medical Director," says Wallerstein. "He manoeuvred me." He did the same with Reinstein, who at one point left in a huff and spent a month at a university in Paris. Henderson constantly called and e-mailed, feeding his ego – imagine the things he could do as a national medical director. Henderson’s statement of claim in fact talks about appointing Reinstein as a national medical director, "with the intent that both Wallerstein and Reinstein co-chair the position." It seems an awkward and expedient arrangement. But Reinstein, who believed that in a medical company there was no such thing as non-medical staff -- "The receptionist is medical," he says; "she’s a medical receptionist" -- accepted and was happy, until some new unilateral decision outraged him. "They’d be really good buddies," says Wallerstein, "and then they’d be at each other’s throats."

And yet somewhere in the midst of this expansion, as Lasik announced the opening of four new U.S. clinics in March, and six more in April, the key medical staff came to feel ever more marginalized. The same people who had accepted the promotions and jumped aboard Henderson’s expansion drive became frustrated and fearful around his decisions, and the mood turned against the CEO. "It changed from ‘Wow this is exciting and amazing and gosh, we’re gonna do it,’" says Reinstein, "to ‘we are going fast and we’re heading directly for a brick wall.’"

Sutton had been forced to the periphery by his own professional crisis and by Henderson’s apparent efforts to scapegoat him. "He villainized Hugo a lot," says Reinstein. "Made him into the bad guy to everyone." That attitude certainly permeates sections of Henderson’s statement of claim. It talks of Sutton’s failure to respond to controls placed on him "to correct his recurring negligence," alleges that Henderson was fired to prevent him from dealing with Sutton’s "professional incompetence," and suggests that Henderson was worried "about the negative impact of Sutton on the ability of the defendant companies to raise new financing, maintain insurance, attract surgeons … and maintain internal staff morale."

Yet Sutton did apparently begin to try for some semblance of control. He lobbied members of the Lasik board, which included himself, Henderson, Douglas Mason and Stuart Ross, of Clearly Canadian Beverage Co. (neither of whom agreed to be interviewed for this story), businessman John Withers (who could not be reached) and Nicholas Geer, who for 20 years had been a right arm to billionaire Jimmy Pattison and joined the medical company’s board because he was impressed with its business model. Sutton had difficulty getting the majority of the board to listen to his pleas, however, because Henderson had managed to poison their view as well.

Sutton’s salvation came in the spring of this year, in the form of troubling news.
PriceWaterhouseCoopers, while auditing Lasik’s financial statements, grew concerned. According to the Lasik statement of defense, the auditors insisted that "they would likely tender their resignation" if Henderson was allowed to continue "unfettered."

That couldn’t be ignored. "The board started to wake up," says Wallerstein. It was then, according to the Lasik statement, that Nicholas Geer interviewed the Lasik medical team. Recalls Reinstein, "We said, you know, we have lost it. We don’t know where this is going."

On May 4, Henderson’s version of Lasik’s financial results were released. When the company issued the restatement demanded by the auditors, it showed that first quarter revenue and earnings had each been overstated by more than $2 million, and that expenses associated with business development were nearly ten times what had been reported.On May 17, as detailed in the statement of defense, the board approved a resolution to restrict Henderson’s control, including his ability to hire, fire and reprimand employees. He also had to get the board’s approval for any contracts, agreements, loans or credit. But to Sutton the board seemed incapable of addressing what, to him, was the obvious need – to force Henderson out – and he wasn’t going to wait for the board to "scuttle around and rationalize" whatever came next. The Lasik statement shows that three days before the board finalized its get-tough resolution, Sutton had already begun soliciting proxies "seeking the appointment of a new board of directors" through his own company, TMX Laser Vision Canada.

Nicholas Geer, entirely fed up with the Lasik drama, resigned his directorship on May 27. Though he’s careful not to reveal what went on in Lasik board meetings, Geer says, in deeply cultured tones, "I like Hugo. I like him as a person." His opinion of Henderson is quite different: "I found Michael Henderson very difficult to work with."

According to Sutton, Geer recognized the board’s inability to deal with Henderson, and privately encouraged him to use his departure as a means to initiate some sort of change. And Avi Wallerstein, clearly in Sutton’s camp, was appointed to fill Geer’s board seat in June. Meanwhile Philip Louie, a former Lasik Vision accountant and still a shareholder, assisted Sutton in assembling the shareholder votes to replace the remaining board in advance of the annual general meeting scheduled for June 22, a Thursday.

Michael Henderson’s final week as Lasik Vision’s CEO was an eventful one. On June 15, according to Lasik’s statement of defense, having learned of the effort to solicit proxy votes, Henderson drafted a memo to the board and "coerced" members of management to sign it, declaring their support for him and asking that Sutton and Wallerstein be removed. On the Saturday before the AGM, Withers, Mason and Ross told him that his ouster was imminent. He attempted, again according to the statement of defense, to negotiate a severance package of $1,410,000 (U.S.), and announced that if he didn’t get it, he’d implement a nine-point plan, including allegations of a medical "cover-up" within Lasik, to "destroy the company." Indeed, Henderson outlines cover-up allegation in his statement, claiming that Reinstein and Wallerstein failed to inform him of 103 "potential" lawsuits against Sutton, based on a list of patients due to receive
"corrective surgery" using Reinstein’s scanning device. The Lasik statement of defense, in addition to denying that Henderson wasn’t informed, suggests that he has misunderstood the purpose of the technology.

Next, Henderson held an unusual meeting. According to several interviews, it happened during the regular 7 a.m. Monday management gathering to be attended by Watson, Matthews and others, although the statement of defense claims it was Friday, June 16. Before the managers arrived, Henderson set out a kind of Last Supper, with red juice – or perhaps it was wine – and hunks of bread laid at each setting. Then he told the managers that there was a Judas among them.

The next day, Withers, Mason and Ross resigned from the board. And on the Wednesday, Henderson, who by now was reachable only through Harbottle, was asked to attend an urgent board meeting to appoint new directors. At his own request, Henderson chaired that meeting, until they reached the point of "any other business."

"Perhaps he had a premonition of what the other business might be," says Sutton, with coy restraint, "so rather than stay and discuss the other business, he actually left the meeting." The new board then terminated the employment of their CEO.

He received notice in a letter that evening. At the next day’s AGM, Henderson sat expressionless, with his lawyer and Sandra Matthews at his side, and watched as a large majority of Lasik Vision shareholders confirmed his firing and the appointment of the new board, which now, in addition to Sutton and Wallerstein, included Philip Louie, John Porter (co-founder and director of the Grandvision group, Europe’s largest optical retailer), and Dr. Nurudin Ahmed. Throughout the meeting, Henderson seldom made eye contact with the group up on the platform, but Matthews did. "She literally stared people down," says Wallerstein. "She would maintain this ridiculous, angry stare for two, three, four, five minutes at a time." If so, it may have been because Matthews was fuming over being ousted herself – her own statement of claim alleges that on or about the same day as the AGM, Lasik refused "to permit [her] to perform her functions" and escorted her from the office in a manner she describes as "demeaning, distressing, humiliating, embarrassing and unfair."

On August 18th, Henderson filed his wrongful dismissal and medical malpractice statement of claim. He devotes much of its 31 pages to detailing the salary, bonuses and stock options owed to him, as well as laying out the alleged misdeeds already mentioned. But easily the most lurid allegations in Henderson’s statement centre on Sutton’s competence as a surgeon, and Henderson uses himself as exhibit A.

Back in March, 1998, Sutton performed laser refractive eye surgery on both of Henderson’s eyes, which Reinstein says suffered from severe hyperopia. The surgery, Henderson claims, "was negligently performed with a poor result in the plaintiff’s left eye and a very significant deterioration in the plaintiff’s vision in the right eye."

According to the statement, Reinstein and Avi Wallerstein not only identified "negligent procedures performed by Sutton and had established and implemented standardized operating procedures," but that Reinstein agreed Sutton had botched the job on his partner’s eyes. According to the statement, Reinstein told Henderson that he could correct the problem. Perhaps it was this assurance that convinced Henderson to later recommend that both his mother and his cousin fly to Vancouver for the same surgery.

Lasik’s statement of defense denies that Henderson has suffered the damage he alleges, or that if he has, it "is not of the nature or extent alleged." But Reinstein does admit, "He didn’t see well out of his right eye. He had a complication." Henderson’s problem, Reinstein insists, is that the man doesn’t understand the difference between complication and malpractice. "Well, maybe you shouldn’t expect him to," he sniffs."He’s not a doctor."

Businessmen are not doctors, declares Reinstein, and doctors are not businessmen. And yet the worlds of business and medicine, which seem so awkwardly merged, have in the case of Lasik Vision still produced something remarkable. Despite the ungodly amount of litigation, both medical and corporate, that now swirls around it, the company has become, in Hugo Sutton’s words, "a huge machine that pumps out 35,000 eyes a quarter." Sutton, having recovered his CEO’s mantle and become chairman of the Lasik board, now operates on none of them.

Lasik is still financially fragile compared to TLC – "They’ve got $150 million in the bank," says James Watson, "Lasik Vision has basically none" – but in the last few months, it has surpassed its arch rival in the number of procedures it performs, despite having roughly half the number of clinics. And it has arguably influenced the surgery prices posted by competitors -- $1,900 at Michel Pop Clinics in Montreal, $2,850 at TLC in Vancouver – though none, it seems, have instituted a company-wide price as low as $1,598 per pair of eyes.

You have to hand it to Henderson, says Reinstein. "He’s an amazing guy. I learned a lot from him." In fact, Reinstein has joined with some partners to form his own company on the side, to build and market his ultrasound scanner, so that doctors can measure the cornea before they cut. "Call me a visionary, but frankly it’s pretty damn obvious," says Reinstein, already a salesman.